A personal loan can be used to finance just about anything from a holiday to a wedding, from a camera to home renovations. If you’re self-employed and cash flow is poor, you can take out a personal loan to tide you over the lean times. There are four main types of personal loans – secured, unsecured, variable and fixed. At PMK Finance we will advise you which one is the best for your particular circumstances.
When you take out a secured loan the item purchased with the borrowed money is held as security against the loan. If you fail to meet your payment obligations, the item purchased can be repossessed and sold. The money raised is then used to pay off the remainder of the loan. Secured loans are best suited to more expensive purchases and, because of the relatively low risk to the lender, interest rates are lower than those for unsecured loans.
An unsecured loan has no assets held as security against it. If you need money for everyday personal purchases, this type of loan might be adequate. However, because there is no security, interest rates tend to be higher than for secured loans.
With a variable rate personal loan, the interest paid may change during the life of the loan. If interest rates fall, your loan repayments will go down accordingly. However, if rates rise, so will your repayments. If the loan is over a long period, this can make budgeting difficult.
As the name suggests this type of loan has a rate of interest which is fixed for the life of the loan. This makes budgeting much easier as you know exactly what you loan repayments will be no matter what happens to interest rates. If interest rates fall below your fixed rate you may feel you’re paying too much but if rates climb above you’re fixed rate you’ll feel as if you are saving money.
Contact PMK Finance today to find out how we can help you.