The Various Ways to Borrow Money

online loansOverdrafts, online loans or credit are all methods of borrowing money. Each type of borrowing will suit different situations and different people. This article looks at each method of borrowing in further detail.

An overdraft is similar to having a safety net for your current account. With an overdraft you have the option to borrow a fixed amount if you have no money available in your current account. An overdraft offers flexible borrowing as you can pay it back when it best suits you. The interest rates on an overdraft are generally high; therefore they are not suitable for borrowing a large amount of money, over a longer period of time.

Loans:

Moneylines:

An institution which invest and lend in those areas which are deprived or unable to access finance in the mainstream market. Money is provided by Moneylines for: home improvements, equipment or property purchases, bridging loans, personal loans, start-up capital, and working capital.

Secured Loans:

If repayments are not met on a secured loan, the lender can force the sale of the asset which the loan was secured against. These loans are often a cheaper alternative to unsecured loans as they are a safer bet for the lender. This type of loan is best suited when borrowing a larger amount of money over a longer period.

Unsecured Loans:

With an unsecured loan, your promise to pay it back is what the lender has to rely on. As this is riskier, the interest rates are usually higher. In most instances set payments are agreed over a specific period. If you decide to pay earlier than stated, a penalty may be incurred. Unsecured loans are a good option if you are looking for a loan for the short term (1-5 years.)

Credit Union Loan:

An organisation which is run by its members and for its members. Once a person has established that they are a reliable saver, they will be able to borrow money, which they can afford to pay back. The FSA (Financial Services Authority) regulate Credit Unions. Any money saved in a Credit Union is therefore protected in the same way money in a bank would be. It is usually the case that the members have some sort of bond such as they work in the same place or perhaps live in the same area.

Credit:

Using some form of credit agreement or even credit cards as a method of payment for services and goods is also a form of money borrowing.

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