Which Loans Carry The Least Risk?
When deciding upon a loan, it is vital to weight up which ones hold the least risk. Of course, some level of risk is accepted as part of the nature of loans however having control over this risk is where the greatest benefit comes to you. With this in mind, it’s worth looking at which loans are available and which of these carry the least amount of risk.
Secured and Unsecured Loans
Generally speaking, the majority of loans are either secured against an asset of yours or they are taken out with the expectation of there being high levels of interest to be paid. Secured loans are usually represented by mortgages and high value loans whereby an asset of yours is used to offset the cost of lending. In terms of repayments, the monthly costs are relatively low however it carries the risk of the lender being able to reclaim the outlay via your assets should you be unable to pay. In this respect, a secured loan should be taken up with these risks in mind as part of the worst possible outcome.
On a different note, unsecured loans often represent personal loans whereby the lender generally chargers higher interest rates and payments are required over a shorter length of time when compared with secured loans. So whereas an unsecured loan does not carry the risk that you could lose valuable assets, it can lead to financial difficulties, specializing with the prospect of high interest rates.
How to Reduce the Risk
Loans can be tailored around you and your ultimate goal is to get the best possible deal. In terms of secured loans, it can be structured so that instead of your home being repossessed, should you be unable to pay, you can set up a foreclosure or the sale of your home to finance your loan.
Unsecured loans can also be dramatically lowered in risk with the acquisition of a guarantor. The guarantor, generally family member or spouse, agrees to make the payments for you should not be able to do so. This reassurance to the lender reduces the level of risk and often means you can get better deals even with a bad credit history. Furthermore, consolidating multiple loans into one single loan can be a great way of simplifying your outgoings however remember that this won’t reduce the overall amount you have to pay.
High Risk Loans to Avoid
I’m sure you have heard plenty of bad press regarding payday loans. In short, these are loans which are available to almost anyone at the click of a button and carry huge interest rates that often end up making the debt repayment more than the original loan itself. While some people find ways to use these effectively and efficiently it is recommended to plan out your repayment plan should you go ahead with this type of loan.
Author Bio: Luke James writes about finance, from financial advice from TheFinanceLegend to the latest trends. You can find out more on Google +.
Category: Loans
