Personal Asset Loans VS Bank Loans

| February 23, 2013 | 0 Comments

Loan

If you’re considering taking out a loan, understanding all the options available to you can be difficult – especially as your choices are no longer restricted to bank loans. With that in mind, I have put together a quick guide to help you work out whether personal asset or bank loans would be best for you.

Now, before I start, I’d just like to remind you that products offered by different lenders do vary, so the below is only intended as a general guide – I’m not promising that every term/condition/rate mentioned below will be exactly what’s available to you.

Let’s start with personal asset loans, shall we?

Personal Asset Loans

What are they?

Compared to bank loans, personal asset loans are fairly new, so I’ll just give you a quick definition.

They allow you to take out loans against things like fine jewellery, classic cars and diamonds through online lenders. I suppose the simplest comparison is with high-street pawn shops, but modern-day online services are more sophisticated in that they deal with high-end valuables, offer professional valuations and a formal short-term loan.

Pros:

• You won’t need to go through a credit check
• If approved, you can receive your money within 24 hours
• You can borrow up to 70 per cent of the total value of your items
• There aren’t any set-up or early redemption fees
• There’s no penalty for failing to repay the loan

Cons:

• If you fail to repay your loan, the item in question will be sold to cover your debts
• This kind of loan is usually a short-term solution lasting around six months, so it’s not suitable if you want a significantly longer repayment period
• The APR tends to be higher than that of traditional bank loans

Traditional bank loans

The main options

Obviously, there are many different types of traditional bank loans, which means there is more to consider when deciding whether or not to apply for one. To help give you more of an idea of what’s out there, you can broadly narrow it down to two main options – secured loans and unsecured loans.

A secured loan is taken out against your house, which means you agree to use your property (provided you own it, of course) as security against your debts. This means that if you fail to repay your loan, you risk losing your home.

An unsecured loan is also known as a personal loan, and with it you can usually borrow between £1,000 and £25,000. It’s not secured against any of your assets.

Pros:

• You’ll have a wide choice of options if borrowing from a bank
• You can choose between long-term and short-term loans
• Both fixed-rate and variable-rate loans are available
• You don’t need to part with any possessions to secure the loan
• The APR will usually be lower than that of personal asset loans

Cons:

• Your credit score/financial history could negatively impact the sum you can borrow and the amount you have to repay
• You could face fees for early/late repayment
• The process is likely to take longer, due to credit checks and other formalities
• You might need to secure the loan against your house in order to obtain the sum you need

Tags:

Category: Loans

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