At some time in your life, you will probably have to borrow money. This is part of today's society where people prefer to buy goods and services on credit rather than saving up and paying cash. The positive side of having to borrow money is you build a credit record which is important for large purchases such as buying a house. If you don't have a credit record you may find it difficult to borrow money from most lenders.

Which loan is best for me

There are two main types of loan offered on the market. Secured and unsecured. These are explained in more detail below. Before selecting the type of loan you need, take into account the following points.

1.How much money do I need to borrow.

2.Over what length of time do I need to borrow the money.

3.How much can I afford to pay back each month (or payment cycle).

Answering these questions will help you to decide on whether you should have a secured or unsecured loan.

Secured Loans

Secured loans (or homeowner) loans are secured against some type of collateral. These loans are generally secured against your car or house as they are usually a person's biggest asset. By securing your loan against an item, it allows the lender to sell your car or house if you default on your loan repayments. By having the loan secured the lender is assuming less risk in lending you money as there is a reasonable possibility of them getting their money back. This will result in a lower interest rate been charged on the loan. Secured loans are generally taken over a long period of time and for a large amount. A common example of a secured loan is a house mortgage.

Unsecured Loans

Unsecured (or personal) loans are not secured against any assets. The loan providers make their decision on whether or not to lend you any money on the basis of your credit rating. By scrutinising your credit rating helps the unsecured lender to determine the chance of you repaying the money they have lent you. If you have county court judgements (ccj's) against you name or a poor credit rating, it may still be possible to obtain an unsecured loan, however the interest rate you will pay will be much higher. This is due to the increased perceived risk for the unsecured lender.

Borrowing money can be nerve racking and is a big decision in your life. Always make certain you get sound professional advice prior to borrowing any money and prior to signing any papers. Several loan providers work as independent agents on behalf of the major money lenders and banks. They can supply you with free advice in the hope that you may borrow through them. Ensure that any advice you get has no strings attached and enquire if there are any upfront fees for the advice. Use the internet to compare rates of interest and terms and conditions so you know you are getting the best possible deal available prior to making the final decision on which lender you will borrow from.