Compare secured loans and save money

People apply for loans for a variety of reasons. Maybe to buy a car, for some home improvements, or consolidate existing debts. With so many loans available, it is important to know the guidelines for choosing the best one.

Choosing the type of loan will be made depending on a few factors: the amount that you require, the presence of a property to guarantee the loan, repayment period or credit rating.

In those cases where a big amount is needed, the best choice is a secured loan. For those who don’t know, a secured loan is a loan where the borrower puts in balance some property of his (house, car, jewelry) to cover the lender’s loss in case he fails to make the repayments. This loan is generally carrying low interest rates and people with a bad credit rating who might not have been approved otherwise for unsecured loans, are often approved for secured loans. They particularly advantage the lender, because of a win-win situation- either he gets the loan back plus the agreed interest, either he gets some repayments and the collateral used as a security.

The lack of risk for the creditor puts you in a situation of advantage, because you are in a position to negotiate. It would be wise to get your own appraisal so you know where you stand. To start out, go to multiple banks and credit unions and see what they have to offer. Cash stores could be skipped, since they charge higher rates.

To compare secured loans, you must focus on the following aspects:

  • APR – annual percentage rate: it is the most illustrative figure for the loan; it includes interest rate, additional loan charges and fees; for example, a secured loan might have a lower interest rate, but with all fees and charges could come to a high APR

  • Repayment period: every lender may offer a different repayment period for the same amount loaned; it is best to choose the one that makes monthly payments affordable and leaves you with money for other expenses, even if this will take longer; still, keep in mind that a longer period means more interest to pay, so do the math and be sure that this monthly comfort doesn’t get to expensive
  • Early payment fees and other possible charges:
    • – You might be in a financial position that may allow you in the future to pay the entire loan before the scheduled date; in this case it is advised to ask if the are any early repayment penalties. In cases likes this, most of the lending institutions will try to protect their profit and charge you a fee as high as 7 or 8% of the loan’s value!
    • – Clarify how many repayments you are allowed to fail before repossession
    • – Find out if there are any penalties for late payments; how high are they; when will them add up

Conclusion: the best loan isn’t necessarily the one with the lowest interest rates.
Compare secured loans to be ensured you make the best choice. Lots of loans may seem appealing on the surface, but on the long run might have a negative impact on your finance.

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