Understanding Loans

Loans are available today from a variety of lenders, including banks, credit unions, financial institutions, and even supermarkets. With so much competition between lenders, it pays to shop around to find the best deal available.

There are essentially two major types of personal loans, secured loans and unsecured loans. With a secured loan, the borrower's property or other assets are used as security for the amount borrowed, in contrast with unsecured loans where the lender is given no such security. As an unsecured loan represents a greater risk to the lender, it will usually attract a higher interest rate compared to a secured loan.

Loan amounts start from around $500 and may reach $100,000 or more in the case of secured loans; however, this very much depends on the lending institution, and of course, the borrower's financial circumstances.

A word about borrowing ...

So you want to borrow money? Before you do, you'll need to ask yourself a few key questions to help decide your best course of action.

Do you require short term borrowing (a few months or less)?
If so, is the amount small?

If the answer to both of these questions is 'yes', then your best option may be to arrange an overdraft facility at your bank. Alternatively, you could borrow on your credit card. While credit card borrowing can be an expensive source of finance, it is nevertheless handy for short term borrowing.

Do you want to borrow for a longer period, perhaps up to a year?

In this case, an overdraft may be useful or if you have a life insurance policy, you may be able to borrow money relatively cheaply by using it as security.If you have a 'gold card', you may be able to borrow amounts of up to $20,000 at a reasonable rate of interest.

Do you want to borrow for an even longer period, say for 1 to 5 years?