Loans from a Bank

A loan from a bank comes either secured or unsecured. You may already have unsecured loans from the bank and not even realise. Your overdraft facility and credit cards are forms of unsecured loans.

If for some reason you don’t pay these debts the bank can not repossess your house for example, the debt is not ‘secured’ against anything. As it is not secured you will be paying a higher rate of interest than a secured loan, and your credit will be less, because it is a greater risk to the bank.

If you decide that you are going to apply for a secured loan. Then you will need to prove to the bank that you own an asset which is worth more than the amount of money you are asking to borrow. This asset is used to ‘secure’ the loan. So if for whatever reason you fail to pay back the debt, the bank can legally take ownership of your asset and sell it to get there money back.

Most banks will suggest that on top of the loan you buy loan insurance, so for example you lose your job through redundancy or get run over by a crazy bus driver then the insurance will pay off your debt and your family doesn’t get landed with the bill. This personal loan cover premium is usually added to your loan in a one off amount and you pay it back over the term of the loan.

As well as an asset to secure the loan will l need to show proof of income and possibly a work contract. A permanent contract is better than a temporary one. If your self employed or you have your salary paid in the same bank as you are applying for the loan from, then the can obviously already see that you have a income and will be more than happy to get you into debt with them.

The more you borrow the lower the rate of interest. If your loan period is spread over a longer period of time your monthly payments will be smaller – but remember by doing it this way it will take longer to pay off your debt and you will pay allot more interest in the end.

Be smart and do some simple math, remember they want to make money from you!

To learn much more about different types of loans, visit Crunch Bank Loans, where you will find this and much more.