Friday, 10 July 2009

Personal loans to reduce debt problems

posted by debts.org at 04:56

Depending on how healthy your finances are, you can borrow up to £15,000 from a bank, building society or loan company. The money normally has to be paid back from between 6 months and 10 years.Secured and unsecured loans and debt problemsSecured and unsecured loans can help or hinder your debt problems, so you need to think carefully before taking one out. A secured loan is one that is directly linked to your house, which means you may have to sell your home if you can´t keep up with repayments. Unsecured loans are not linked to anything, but if you default on your repayments, you could be credit blacklisted.

If you are credit-blacklisted you could be prevented from taking out new credit cards, an interest-free deal in a shop or a mortgage.Shop around for the best loan deal for youFor the best loan deal for you, shop around and take your time to read through the small print before making a decision. Rates normally charged are between 7% and 20%, but generally, the more you borrow the lower the rate. You can even get a bank loan deal through supermarkets nowadays, so don´t think banks and building societies are the only options. If you think by taking a loan you will be getting yourself into more debt, and have difficulties paying it off, then look for alternatives. Debts.org can advise you about debt management plans (DMPs) and Independent Voluntary Arrangements (IVAs) which could help you, without increasing your debt problems.

Beware APR on personal loansBe careful when comparing the terms and conditions of different personal loans, as lenders calculate the annual percentage rate (APR) in different ways. You may be able to get a loan for a specific item with cheaper interest rates. Ignore monthly interest rates advertised by loan companies, which are always lower than the annual rate and can be misleading. Make sure you understand what you are letting yourself in for before signing on the dotted line and ask plenty of questions.Monthly repayment problems on personal loans
Loans are normally repaid by monthly instalments, over an agreed period of time. You may be in a position a few months/years down the line to pay off the whole amount owed in one go. Be aware of any penalty you may be asked to pay for early repayment of the loan in full. Where possible, keep the repayment period to a minimum as the longer that period is, the more interest you will be charged in the long run.

Advice about flexible loansFlexible loans are becoming more popular, and allow you to pay back the loan as and when you want (terms and conditions obviously apply). Flexible loan interest rates are usually higher. Always find out, when taking out a loan, what the monthly payments will be and how much you will pay back in total. This gives you a clear idea of whether it is worth taking out or not, or whether you should seek advice from debts.org about alternative arrangements such as a debt management plan or an IVA. If you are turned down for a loan your bank or building society must state why.

Labels: calculate, fexible loans, IVA