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Loan is a term used to refer to the money a borrower is issued by a lender. This money is usually paid back within an agreed period while the total amount paid is inclusive of an interest charged on the borrower.  Loans are offered for a wide range of uses. The use usually depends on the borrower’s needs.

How much is usually given?

The loan amount offered mainly depends on three factors. The client’s need, the borrower’s repayment ability and the lenders loan policies. These factors combined determine the amount that a borrower can be advanced by the lending company. There are mainly two types of loans available. These include secured   and unsecured loans.

Secured loans

A secured loan refers to money lent with the loan tied to an asset. Secured loans range from home loans to logbook loans. The asset tied to the loan usually belongs to the borrower in most cases. These loans are usually considered low risk. The interest rates attached are usually lower and the repayment period is very flexible. In case of default in secured loans, the asset used is usually seized and sold in order to recover the loan money.

Unsecured loans

Unsecured loans refer to small loans that are usually taken out for personal use. These loans are usually considered high risk loans and have a higher interest rate. The issuing of unsecured loan usually depends on the borrower’s credit history, ability to repay the loan, and their employment status. The amounts awarded are usually small and the repayment period is also short.