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What Is A Personal Loan?
Personal loans can be divided into two categories: secured personal loans and unsecured personal loans. Homeowners can apply for a Secured personal loan (using their property as security), whereas tenants only have the option of an unsecured personal loan. Below is a more detailed outline of both types of loans:
Secured Personal Loan:
A Secured personal loan is simply a loan that is secured against property. Secured personal loans are suitable for when you are trying to raise a large amount; are having difficulty getting an unsecured personal loan; or, have a poor credit history. Lenders can be more flexible when it comes to Secured personal loans, making a Secured personal loan possible when you may have been turned down for an unsecured personal loan. Secured personal loans are also worth considering if you need a new car, or need to make home improvements, or take that luxury holiday of a lifetime.
Benefits of Secured personal loans include:
Lower monthly repayments than unsecured personal loans
The ability to borrow more money
Spread repayments over a longer period of time More detailed information??
A Secured personal loan is a type of loan available to people with securable assets. Usually these assets take the form of property, such as a home; this is why Secured personal loans are often referred to as homeowner loans, ?home loans? or ?second charge loans?.
You do not have to own your own home outright to be able to take out a Secured personal loan; if you have a mortgage you can put the proportion of the home that you own up as security.
Because a Secured personal loan is secured on property, most lenders will approve your loan even if you have a history of adverse credit such as county court judgements (C.C.J?s), defaults and arrears. This make Secured personal loans very attractive to people who would otherwise not qualify for a loan from their local bank.
You can borrow any amount from ?5,000 to ?75,000 and repay it over any period from 5 to 25 years. You simply select a monthly payment that fits in your current circumstances. Generally, Secured personal loans tend to be cheaper than unsecured personal loans and other forms of borrowing.
The interest rate for a Secured personal loan depends upon various factors such as the amount of money you borrow, the length of time and personal details. You can also insure your payments for peace of mind, so you do not have to worry if you lose your job or are unable to work because of accident or sickness.
Secured personal loans are arranged through leading financial institutions so you can be assured of a professional and responsible service.
Once your Secured personal loan application has been processed and accepted you will be made a no obligation offer. It usually takes around 14 ? 28 days for a secured personal loan to be completed.
Unsecured Personal Loan:
An Unsecured personal loan is a personal loan where the lender has no claim on a homeowners property should they fail to repay. Instead, the lender is relying solely on the ability of a borrower to meet their loan borrowing repayments.
The amount you are able to borrow can start from as little as ?500 and go up to ?25,000. Because you not securing the money you are borrowing, lenders tend to limit the value of unsecured personal loans to ?25,000.
The repayment period will range from anywhere between six months and ten years. Unsecured personal loans are offered by traditional financial institutions like building societies and banks but also recently by the larger supermarkets chains.
An Unsecured personal loan can be used for almost anything - a luxury holiday, a new car, a wedding, or home improvements.
An Unsecured personal loan is good for people who are not homeowners and cannot obtain a secured loan for example; a tenant living in rented accommodation.
There are a few things to consider before applying for an Unsecured personal loan:Unsecured personal loans are invariably more expensive than secured loans, and the repayment periods demanded by lenders are shorter too. This is because they have no guarantee that you can repay the loan, and therefore charge you more in interest to cover the cost of insurance policies that they need to take out to protect them should you default on repayments. In the event that a borrower does not pay up, the lender will invoke the terms of the legally-binding credit agreement and pursue the borrower through the legal system.
Lenders are obliged by law to tell you how much they charge for this type of finance and this is worked out as an annual percentage rate (APR). Ask whether the APR figure quoted is ?typical or is what every applicant is charged. You should also investigate whether the interest rate charged is fixed for the lifetime of the loan repayment period, or whether it varies with the base rate. Check too on whether there are early repayment penalties.
Unsecured personal loans vary from lender to lender, so it pays to shop around before making a final decision.
You may freely reprint this article provided the authors biography remains intact:
Auto Loan Buying Tips
Have you ever felt like you bought an auto and financed it and dont really know if you got the right price or financing arrangements after it was all over? Well, dont feel alone. This is a common experience for many people who make auto purchases.
Guidelines for negotiating the car price can be found elsewhere, but we want to share some helpful tips on getting that vehicle financed at the best rates and terms for you.
The first step is to make sure that you negotiate the cars price separate from the vehicle financing arrangements. Most dealers want to lump it all together because they can hide quite a bit of the actual price of the vehicle in the loan contract, and they will usually just try to meet a monthly payment figure that you can live with rather than disclose all the details about the loan.
So your work actually should begin before you ever visit the dealer lot. Try to determine beforehand what vehicle(s) you are interested in buying and become familiar with the average cost for that vehicle, either online or locally. Then make sure that it will fit your budget. Most financial experts recommend that you shouldnt spend more than 10% of your monthly income on vehicle costs, including the loan, gas, repairs, insurance, etc.
Since you now know the price that you want to pay, you need to find out what the loan will cost, so visit some auto loan websites and/or local banks, and apply for an auto loan. See what rates and terms they offer you. Much of that will be determined by your credit history. If you can get pre-approved for a loan, all the better.
Experts also recommend that you try to put at least 20% of the car price on the loan as a down payment toward the purchase of the vehicle, either in cash or in the trade equity of your current vehicle. Why? Well, so many people are being put into loans these days with longer and longer payback periods and little down payment and the net result is that if they want to trade that car in within the first year or so they find that they actually may owe more on the car than it is even worth. So using sound financial decisions beforehand can prevent this from happening.
Now, using all of this information, the price you are willing to pay for the vehicle you want, the average loan you can get, and the best terms that you can get that will fit within your budget, you are now ready to visit the dealer, find the vehicle you have been thinking about and get the deal that will fit your needs. Remember to negotiate the price of the vehicle without financing first. After you settle on the sales price you can then reveal what finance terms you already have found and see if they can beat it.
Get the particulars in writing too. What is the price for the new vehicle? What is the trade amount for your old vehicle if you have one? If you finance through the dealer, what is the APR, the total amount financed, the total amount paid at the end of the loan, the total number of payments and the monthly payment figure itself? If the dealer will not give this clear, concise information, leave and go somewhere else to buy. If they can compete with your prearranged loan terms, then great. If not, get your auto loan elsewhere.
A word of caution. Keep it to business. Its exciting to buy a new car and its also easy to get carried away and buy more vehicle than you need or previously wanted just because it looks so good or has so many features that the dealer will try to convince you that you cant live without. Having predetermined what car you want and the price you are willing to pay will keep you safe in these negotiations but only if you stick to your guns and dont give in to being upsold.
Using these strategies keeps you in control of the negotiation process and keeps you informed all along the way so that you can be confident that the vehicle and the auto loan you purchase is indeed the deal that you wanted.
Hidden Bank Loan Charges That Would Make a Pick-Pocket Envious
There can be more to a bank business loan than making interest and principal payments. Your firm may get a great rate on its new credit line or term loan but you may cry on the way home when you discover the hidden fees and charges.
Even seasoned borrowers can be caught off guard. Borrowing costs can be boosted by thousands of dollars and the effective rate on the loan increased by many basis points as a result of these hidden charges.
Here are some of the fees and charges that can increase your firm?s costs on bank loans:
Commitment fees
Many banks charge commitment fees of ?% - 1% or more to issue a commitment to lend money. The fee is calculated on the available credit amount. Commitment fees significantly increase the effective rate on outstanding loans.
These fees can be negotiated. If your firm has a strong credit profile or if the competition among banks in your area is fierce, ask for a lower commitment fee or ask to have it waived.
Non-use fees
These fees may be charged in lieu of or in addition to commitment fees. Non-use fees usually range from ?% to ?% of the unused credit facility. Although these fees are less onerous than commitment fees, they also increase the effective borrowing rate.
As with a commitment fee, you may be able to get the non-use fee reduced or waived if your firm has a strong credit profile or if the banking environment is very competitive.
Restructuring fees
When your firm has reason to restructure an existing loan, you can expect your bank to charge a restructuring fee for the privilege. For example, if your company has reason to convert a short-term loan into a long-term one, it will probably be charged for this restructure.
These fees can range from ?% to 2% or more plus any bank legal fees or out-of-pocket expenses. If your firm has been a long-term bank customer in good standing, you may be able to negotiate or eliminate the fee. But don?t expect to eliminate the bank?s attorney fees and out-of-pocket expenses.
Bank attorney fees
Attorney fees usually come into play when the bank uses an outside law firm. Making matters worst, many outside bank attorneys require a borrower to hire an outside attorney to issue an opinion letter covering the transaction.
Usually, only the strongest borrowers in very competitive banking situations can totally eliminate paying bank attorney fees. However, if your firm is a valued customer, your bank may be willing to have these fees capped or reduced. Often banks have some leverage with their law firms to get a discount.
Appraisal/environmental evaluation fees
These fees are charged on many asset-backed loans. They usually involve bringing in an outside expert to evaluate equipment or real estate. These fees can be significant, depending on the type of appraisal or environment issue.
Like attorney fees, appraisal or environment evaluation fees are almost always for the account of the borrower. Perhaps the best result one can expect is to have these fees capped or have the lender split the amount in some way.
Unanticipated audit expense
Many banks reserve the right to audit borrowers or to send bank personnel in for inspections. An audit may be required to review accounting procedures or to monitor collections, inventory or another aspect of your firm?s operation. Also, some banks require outside audits by CPA firms in connection with extending credit. Any of these scenarios can create significant expense and involve a substantial time commitment for your firm.
Before signing, review your loan agreement carefully to identify any audit or bank inspection requirement. If your bank requires an audit or inspection that you did not anticipate, try to get it eliminated or try to negotiate limits. You may be able to get a less-stringent requirement or to negotiate a less-expensive alternative to the audit or inspection required by your bank.
If all else fails, try to get audit or inspection fees capped.
Late charges
Charges for making late payments to your bank are generally in your control. These charges can be onerous and can add significantly to your firm?s borrowing cost. It is not unusual to see banks tack 300 basis points onto a customer?s borrowing rate for delinquent payments.
While it is worthwhile during the negotiating stage of the loan to ask for a lower late- payment charge, the best solution is to try to avoid these charges. If you can, try to get the late-payment rate knocked down to 75 to 150 basis points above your borrowing rate.
Expiry of or Failure to Get a Rate-lock
In a stable rate environment, many banks are willing to lock the rate on fixed-rate credit transactions. Rate-locks protect the borrower from adverse rate movements prior to closing. In most cases, rates can be held up to 60 days. Rate-locks are not uncommon in real estate loans and equipment installment loans.
If your firm is negotiating a fixed-rate loan, try to negotiate a rate-lock. You may pay loan interest that is a tad higher, but a locked rate can eliminate an unpleasant interest rate swing.
Once you have locked the rate, try to stay within the holding period for closing the transaction. Most banks will eagerly and aggressively pass on rate hikes in a rising rate market, if you fail to comply.
Many hidden bank fees and charges can be reduced or eliminated if you plan ahead and are prepared to negotiate. You are in your strongest negotiating position before your bank issues a commitment letter and before you sign the credit agreement. Always read commitment letters and loan agreements carefully. Look for hidden fees, hidden charges and unexpected requirements. You can also ask your bank to prepare a separate list highlighting all potential fees and charges.
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