To start with, theres nothing magical about these names. If you have no property to provide the lender with security then it is that much harder to obtain an unsecured (or personal) loan. Even if youre a "good risk" from the lenders point of view, the interest rate will still be much higher than with a secured one.

Secured loans are exactly what they say - secured on your property - usually your house. This is when people often get emotional, letting their emotions rule their heads. "Suppose I cant pay? I might lose my home - much better that I go for an unsecured loan - even if the interest is twice as much". "But what happens if I cant pay then? - I can be made bankrupt". So what is worse - having to downsize on the house a little or being made bankrupt!? Add to that, the fact that house prices are increasing and the case for secured loans can be made out over and above unsecured ones. We rest our case.

Interest and APR (Annual Percentage Rate)

You have doubtless realised that lenders quote in APR terms. Why and what does it really mean? What the APR system is supposed to do is to provide a level playing field so that you can compare one lender with another. The APR is supposed to take into account not only the lenders profits - but the overheads - loan fees, insurance, documentation etc.

Unfortunately every lender interprets what should be Included in a different way. Result - an uneven playing field.

Our suggestion is that you ask your potential lenders to provide a "good faith estimate" showing the exact and individual figures and lending - show you exactly what you are bargaining for - including any hidden extras.

Balloon Payments

These are final loan payments - usually significantly larger than the instalments. For example when you buy a vehicle the credit company may allow you to pay in instalments and then after a period to make a large lump sum payment to secure the vehicle as your own.

What Credit Checks Will My Lender Make?

Any potential lender worth his salt will want to check out your credit rating.

But you can do this yourself - There are a few sites where you can check this for a small fee:-

http://www.australian-records.com/ being one.

What if I Fall on Hard Times?

Sadly accidents, redundancies and sickness do occur from time to time. Distressing in themselves - but all the more so if you are borrowing money. So how can you protect yourself? The clear answer is summarised in one word - INSURANCE. Just as you should never get on your bike without it, never enter into a loan without it - and just as bike insurers premiums vary enormously, so they do for loan repayments. YOU ARE NOT OBLIGED TO TAKE THE COVER OFFERED BY YOUR LENDER - SHOP AROUND! There has been criticism in the press relating to such policies.

I Have an Appalling Credit Rating - What Can I Do?

Maybe not a lot - and (dare we say it) should you really be thinking of a loan in those circumstances?

But if your ailing Uncle Sammy is about to leave you a couple of Million, you might be able to swing it - but why not wait that bit longer.

If you must, as always, shop around.