Moneygate

Plan your loan, say Moneygate

No matter how carefully you plan and budget, there may come a time when you need to borrow money. Millions of personal loans are taken out every year for all sorts of reasons.
But do you know the difference between the types of loans on offer and where to go for the best advice on loans?

Annabel Green, of national IFA Moneygate, said: “The majority of people take out a loan during their lifetime, however most still don’t know much about loans and how they work.”
There are three types of loan – secured loans, unsecured loans and consolidated loans.

Secured loans are lump sums which can be borrowed from banks, building societies and specialist companies for a fixed period. Interest can be fixed or varied and rates tend to fall between 6% and 14%, making them a more practical - and usually cheaper - alternative to credit cards.

Secured borrowing includes mortgages or other loans which are linked to your house or another major asset. The money you borrow is literally secured against the value of the property you own. Put simply, this means that if you fail to repay the secured loan (or your mortgage), then your home can be taken from you and sold to cover your debts, even if they are significantly smaller than the property's value.

Annabel Green, of Moneygate said: “Because the risk of a secured loan is weighted against you, this is often the cheapest way to borrow. If you do not wish to secure the loan against your property - or you do not own property - then unsecured loans are a popular way to borrow."

As with credit cards, the key to the cost of your loan is determined by the Annual Percentage Rate (APR), which relates to the interest you will pay on the cash you borrow.
The interest can be charged at a fixed or variable rate. Sticking to a fixed rate will help you work out how much you can afford to borrow and give you certainty about your monthly payments.

Annabel Green, of Moneygate added: “Borrow only what you can afford, even if you're offered more and aim to pay the money back in as short a time as possible according to what you can afford. Meanwhile there are times when it makes sense to pay off several high-interest credit cards, an outstanding loan balance and perhaps an overdraft with one loan which has a much lower interest rate. This is called consolidating your debts - rolling several into one.

“Choosing the right loan depends on how much you want to borrow and for how long. But the key is always to only borrow what you can afford or you run the risk of making your debts worse.”

For more information go to www.moneygate.co.uk