A personal loan is a form of an unsecured loan. This loan does not require you to put anything up as collateral (a valuable asset that the loan provider can sell in the event that you do not make your repayments).
Personal loans come in two different forms: short-term loans and payday loans.
Short-term loans usually allow you to borrow up to £2000 for up to 12 months. However, each loan provider will offer you different amounts of money for different lengths of time. This loan is for people who need to make a larger purchase that they can repay over time.
Payday loans work in a very similar way to short-term loans. The key difference is that the amount that you can borrow is usually smaller and you make a single repayment on your next payday. This is an easy way to access finance and is ideal for people who need to make a one-off purchase that they have not budgeted for.
How does owning a home affect your ability to get a personal loan?
Often, homeowners have higher credit scores than people who do not own a home. This is because they pay their bills each month, which can boost their credit scores.
People with higher credit scores are more likely to have more loan providers who are willing to lend them money. This gives the homeowner more choice in terms of repayment lengths.
About credit scores
Credit scores help loan providers decide who they are going to offer finance to. A credit score is a number that is based on several different statistics, such as: how many loans you have taken out in the past, how many repayments you have made, whether you made these repayments on time, if you have defaulted on any loans, and if you pay your bills on time.
All of the above factors give the lender an idea of how likely you will be able to pay off the loan. Because unsecured loans mean that your house is not used as collateral, the only security that the loan provider has is your track recording dealing with credit in the past.
For these reasons, homeowners are more likely to be offered a short-term loan than people who do not own a home.
What is a homeowner loan?
Another option that is available to homeowners is a homeowner loan. This secured loan requires you to put your home as collateral for the loan. This means that if you are unable to make your repayments, the loan provider can sell your home to pay off your debts.
The size of the loan that you can take is based on the amount of “home equity”. Home equity is the amount that your home is worth minus the amount that is still owed on the mortgage. This is most relevant to people who are still paying off their mortgage.
For example, if your home is worth £150,000 and you have paid off £100,000 of your mortgage, your home equity would be £100,000, and because that is the amount of your mortgage, you have paid off.
Because your home is worth a lot of money and you will be able to borrow much more money with a homeowner loan. Homeowner loans can be anywhere between £10,000 and £150,000, depending on the value and home equity of your home. You can pay off this loan over a period of up to 35 years, instead of 12 months.
However, it is worth mentioning that, in the event of non-repayments, you will lose your home.
Which is right for you?
If you are a homeowner and you are unsure about which home is right for you, consider these things:
• Can you risk losing your home?
• How much money do you need to borrow?
• How long do you need to be able to repay the loan?
• Do you have a good credit score?
The answer to all of these questions will help you determine whether a homeowner loan is appropriate for you. If you cannot afford to lose your home (for example, if you have children or other dependents and it is your only residency), then maybe this type of loan is not the best option.
If you only need to borrow a smaller amount of money, then borrowing more than you need with a homeowner loan will cause you to pay more than you have to because of the interest rates.
If you have the income available to pay off the loan within 12 months, then you should get a personal loan.
If you have a good credit score, then finding a loan provider who is willing to offer you a personal loan is simple. If you have a poor credit score, there are short-term loan providers who will still be willing to work with you.
Personal loans with BestShortTermLoans
If you’re looking to find a short-term loan and gain access to the finance you need, try BestShortTermLoans. We are a loan broker, not a lender. This means that we submit your application to our panel of lenders, who will give us their best offers.
It all starts with your application with us. We will ask you how much you would like to borrow, how long you would like to borrow the money for, and what income streams you have (so that you can pay off the loan). Once this is done, we will then run a quick credit check on you.
Then, we will submit your application to our network of lenders. They will get back to us with their best offers, which we then pass directly to you.
To get started, click here.