If you need access to credit, then you’re not the only one. Millions of people across the globe apply for credit in one form or another – be it credit cards, overdrafts or personal loans. There are many different options to choose from, and in this article, we discuss a few of these choices.
If you’re wondering what are the cheapest loan types for your needs, Wonga summarises it pretty well: When considering which form of credit to use, it’s important to not only consider which is best suited to achieving short-term goals from small things like buying a laptop for school, or larger spends like paying the deposit on a car or even buying a home. But also which will be the cheapest credit option to repay over time.
By choosing the credit that best fits your requirements you have the best chance of maximizing its affordability i.e. you can ensure you have the cash when you need it, but also that you’re able to afford the monthly repayments with interest. Different credit options all have different requirements – meaning that some will be more affordable than others.
Let’s take for example personal loans.
The Balance.com explains: “Personal loans are sometimes called “signature loans” or “unsecured loans” because there is no collateral to secure a personal loan. Instead, lenders approve personal loans by evaluating your creditworthiness.” They go on to say that personal loans are usually pretty easy to apply for, compared to home and car loans. This makes them ideal for small home improvements. You can use the money for almost anything, but it is sensible to borrow only as much as you need and you sometimes pay this off in one lump sum with interest.
Now a closer look at installment loans.
Installment loans can be used to borrow money for any purpose. However, installment loans are different from personal loans because rather than repaying your loan with interest in one lump sum, installment loans give you a ‘repayment period.’ This is where you make regular scheduled repayments over a few months. They can sometimes be more expensive than personal loans but they are useful for spreading out the repayments.
Some information now on home loans.
A home loan is a loan to purchase a home. Home loans usually have an interest rate that can be lower than a personal loan or an installment loan. However, you put an asset – usually your home – as a ‘security’. This means the bank can repossess the home if you fail to make your payments on time.
Whichever loan you decide to go for, it is important that you consider it carefully. The first and probably most important point is that you use a reputable loan provider and not a loan shark. This gives you more cover and support should you need it.
You should also ensure that you can pay the loan back over the repayment period. For this, you should take a close look at your finances and then evaluate whether the loan would be helpful or not.