A Guide To Loans - Ireland´s Comparison Website.
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A Guide To Loans
Category: Financial |Date Published: 27/08/2010
A Guide to Loans
Even now the financial markets are feeling the impact of the meltdown events of a few years ago. The easy low cost credit of the 1990`s and 2000`s fuelled unprecedented consumer growth and increases in property prices - until it all started to fall apart in late 2007 due to a fall in US property prices and the complex syndication of mortgage backed loans around the globe.
So what is left of the loans market today bears all the scars of the past few years with lenders being more discerning on who they advance money to and on what terms.
Essentially there are two types of loan - unsecured and secured.
Unsecured loans are where lenders advance money on the promise that the borrower will repay the capital and interest charged over a fixed period of time up to a maximum of 10 years. Most unsecured loans have repayment periods of less than 5 years. If the borrower defaults, the lender can sue the borrower for the balance and may get a bailiff to seize assets up to the value of the balance owed.
Secured loans are where money is advanced against the pledge of some form of additional collateral. This is usually in the form of a mortgage or charge against a house or other property and it means that if the borrower fails to make the payments as contracted the lender may initiate proceedings through the court to seize the property pledged with a view to selling it to pay off the balance owed, plus charges. Most secured loans are mortgage backed to help people buy their homes although can be used to buy cars, boats or other valuable assets. The costs of setting up a secured loan are higher than an unsecured loan since the security has to be assessed for value and the necessary legal charges drawn up and registered. Secured loans tend to be for larger amounts (£ / € 7,500 plus) and repaid over longer periods (minimum 5 years up to 30 years).
Both types of loan can be either fixed rate (where the interest charges are calculated on day one at a known rate and do not change) or a variable rate linked to some base charge rate. Variable rate loans have a fixed regular monthly capital element and the interest charged changes based on the current market base rate of interest plus a fixed know margin.
Acceptance or administration fees have risen and lending margins have widened meaning that it is relatively expensive to borrow than a few years ago. Secured loans should have a lower interest rate charged reflecting the lower risk - although their fees charged will be higher.
As always, finding the right loan means shopping around and comparing terms. The total amount repayable (including charges) should always be compared along with the Annual Percentage Rate charged. Do not just look at the monthly payment - look at the whole loan repayment before deciding. If looking at a new debt consolidation loan then make sure that the new monthly payment is well below the combined individual loans that you are looking to settle.
Even now the financial markets are feeling the impact of the meltdown events of a few years ago. The easy low cost credit of the 1990`s and 2000`s fuelled unprecedented consumer growth and increases in property prices - until it all started to fall apart in late 2007 due to a fall in US property prices and the complex syndication of mortgage backed loans around the globe.
So what is left of the loans market today bears all the scars of the past few years with lenders being more discerning on who they advance money to and on what terms.
Essentially there are two types of loan - unsecured and secured.
Unsecured loans are where lenders advance money on the promise that the borrower will repay the capital and interest charged over a fixed period of time up to a maximum of 10 years. Most unsecured loans have repayment periods of less than 5 years. If the borrower defaults, the lender can sue the borrower for the balance and may get a bailiff to seize assets up to the value of the balance owed.
Secured loans are where money is advanced against the pledge of some form of additional collateral. This is usually in the form of a mortgage or charge against a house or other property and it means that if the borrower fails to make the payments as contracted the lender may initiate proceedings through the court to seize the property pledged with a view to selling it to pay off the balance owed, plus charges. Most secured loans are mortgage backed to help people buy their homes although can be used to buy cars, boats or other valuable assets. The costs of setting up a secured loan are higher than an unsecured loan since the security has to be assessed for value and the necessary legal charges drawn up and registered. Secured loans tend to be for larger amounts (£ / € 7,500 plus) and repaid over longer periods (minimum 5 years up to 30 years).
Both types of loan can be either fixed rate (where the interest charges are calculated on day one at a known rate and do not change) or a variable rate linked to some base charge rate. Variable rate loans have a fixed regular monthly capital element and the interest charged changes based on the current market base rate of interest plus a fixed know margin.
Acceptance or administration fees have risen and lending margins have widened meaning that it is relatively expensive to borrow than a few years ago. Secured loans should have a lower interest rate charged reflecting the lower risk - although their fees charged will be higher.
As always, finding the right loan means shopping around and comparing terms. The total amount repayable (including charges) should always be compared along with the Annual Percentage Rate charged. Do not just look at the monthly payment - look at the whole loan repayment before deciding. If looking at a new debt consolidation loan then make sure that the new monthly payment is well below the combined individual loans that you are looking to settle.