Thrifty Thinking: Know about loans and debts consolidation

A loan could act as your best friend in your worst financial situations. In times of need when you face financial crisis the first thing that you would go for is a loan. With only a small amount left in your account it is difficult to meet all your expenses and cope paying for all the necessities. Therefore, when you are caught in a financial crisis you get the best aid by opting for a loan. There are different kinds of loans available for different purposes. Below are the basic categories in which each loan is placed.

-  Secured loans:

The most commonly used loan is the secured loan. Here you get the loan against something that you provide as a security for the loan. Basically, you sign over a valued asset, such as your home which is given as collateral against the loan. This means that if you fail in repaying the loan then the bank has the authority to seize the collateral in order to claim their money.

The best part about these loans is that you get lower interest rates and they are often negotiable. If you possess a good credit rating then you could also bargain for your loan amount, interest rates and repayment period.

- Unsecured Loans:

As the name suggests these loans are not secured against anything, so you can get these loans without providing any collateral. In the event that you are unable to repay the amount then the bank can freeze your account.  The loan is granted based on certain conditions, as you do not provide any security against the loan. The things that are considered for the approval of the loan:

·      Credit history

·      Present income

·      Present debts

Since you are not securing anything against the loan you are charged higher interest rates. Some of the examples for unsecured loans are

·      Credit cards

·      Personal loans

·      Payday loans

·      Student loans

- Debt consolidation loans:

This type of loan is taken usually when you are overburden with many debts. Here you take a new loan in order to pay back all your previous debts at a lower interest rate. There are many advantages of consolidating your debts through debt consolidation loans; some of these are listed below:

·      It provides you with a flexible repayment plan based on your earnings

·      Greater reduction in the overall interest rates

·      You just need to do a single monthly payment rather than paying different creditors

·      This also helps in improving your credit score

Author Bio:

My name is Sarah. I am a tech writer from UK. I am into Finance. Catch me @financeport

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