Only understanding of lending and making educated decisions will lead you down the path of a healthy financial path. The following is a primer on some of the many types of loans that are available to you.
It always seems like emergencies and unexpected situations always happen at the worst time possible. For many people across the UK, there is no reasonable way for them to afford life’s unexpected costs. While there are loans available for situations like these, it is harder for some to be approved than it is for others.
One of the possibilities is that of a secured loan. These are loans based on property, or collateral owned by the borrower. The property can be a car or a home. Mortgages are often thought of as secured loans.
The piece of collateral the loan is based on then becomes a secured debt. In the event that the borrower is unable to pay back the loan, the collateral could be taken as a way for the lender to get back the money spent. The collateral could be held onto or sold by the lender.
One of the growing problems that millions of citizens face is that of large debt. For a long time, it was common for people to continually apply for and be granted credit cards with high limits. As the people overspent these cards and surpassed their income, their debt grew.
Many people have thousands of dollars’ worth of debt in a variety of places. One of the options for them is to use a consolidation loan to put all of the debt together. It can become complicated trying to pay off a variety of credit cards each month.
Consolidation loans allow one to combine the debt that they have into one monthly payment. It is likely that the combined payment will also be more manageable and lower through the use of the loan. It is often used as a way to help individuals get out of debt and finally be able to become debt free.
For a long time, purchasing a home was seen as an investment into ones’ future. People would use home equity loans to gain access to a large sum of money for college costs of housing projects. Home equity loans are based on the amount of money that has been paid towards a mortgage.
The more money that has been paid off, the more money one can borrow. However, since the collapse of the housing market, home equity loans have been harder to come by. This is because many houses are ‘underwater’.
What this means is that because of the significant drop in house prices, many people have a house that is worth less than what they are paying their mortgage for. All of the money they have contributed to their home equity is no longer worth anything because if they house was sold, it would actually leave them in debt.
The majority of students who attend college do not have the money to pay for the expenses out of pocket. In this case, there are a number of different ways to go about getting funding for the school. The federal government has a multitude of programs available for students wishing to further their education.
Student loans are offered both through the government as well as through private banks. Student loans offered through the government are usually geared more towards lower middle-class students, rather than those with parents in a higher income bracket.
Many student loans will not only help cover the cost of tuition but can also be used for other college expenses. These expenses can include rent, food, and the cost of books and other school materials. Most student loans are deferred until a year after graduation.
If looking to purchase a home, it is wise to get going as the interest rates are supposed to rise over the next year. As the housing market regains control and gets out of the slump it is in it will once again become a seller’s market.
Home prices are likely to rise along with the interest rates being offered through banks. Home loans will also become harder to get approved for. Many lending institutions are implementing harder and more stringent requirements in the hope that another collapse can be avoided.
While the interest rates currently available are still below five percent, it is not sure how long those rates will last. A slow increase is expected to be seen over the next 12 months. Home loan amounts will be based on income versus debt ratio as well as credit scores and credit history. It is also likely that down payments will need to be larger than in recent years.
Most car shoppers looking for a new car are not prepared to pay for the car in cash up front. Many people will rely on the use of car loans in order to fund purchasing vehicles. Like any other type of loan car loans are mostly based off of credit reports, and credit history.
Applicants with lower credit scores are less likely to be approved for higher car loan amounts. Usually, the best rate on a car loan is through the company the dealership works with on a daily basis. In many cases, the dealership has a specific agreement with this lender to provide a certain interest rate.
When looking to purchase a car, it is a good idea to approach one’s bank and get an estimate on how much one would be approved for. This way when one visits a dealership, they have an idea what is a reasonable purchase, and what is likely too high of an expense.