Knowledge of your own financial situation and credit goals can be a great aid to deciding what to choose in Secured Personal Loans vs Unsecured Personal Loans. The more aware you are of yourself and the market, the more likely you are to find the perfect deal.

Secured loans have the following benefits:

* They will often have a lower interest rate
* Usually you can borrow larger amounts with secured personal loans
* You may be able to take out high risk personal loans using secured loans
* Can be helpful for debt consolidation loans to keep credit costs down

They also have some disadvantages:

* A more complex lending system
* The risking of a major asset

Unsecured personal loans have these benefits:

* No risk to a specific major asset
* Simpler lending system

They are also disadvantaged by:

* Higher interest rates
* Greater necessity for a good credit rating
* Lower loan amounts

Essentially, if you are sure of your financial future and can thus safely risk a major asset, secured personal loans may be preferable for you. If you cannot be sure of your financial future, and thus cannot risk a major asset, or if you have no major assets, then unsecured personal loans could be a better choice. It can be an excellent decision to consult a professional financial adviser before choosing the right personal loans, and they can help you learn what you need to know about Secured Personal Loans vs Unsecured Personal Loans.

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Often the frustration of rejection is increased by the lender being deliberately vague about why your loan application was declined.

The reason the lender avoids telling you is to protect their lending criteria or rules from being public knowledge and from their competitors.

Whilst the nitty gritty of most lenders lending rules are secret, the broad rules are pretty much universal.

Lenders want to lend to people who have:

* The ability to pay back the loan.
* A good credit history.
* A stable employment history.
* A stable living arrangement.

If your personal loan application has been rejected, it is likely it failed in one of these areas.

Lenders make assumptions about your financial habits based upon on extensive research into previous applicants’ behaviour and habits. This allows them to make assumptions about you and your application.

By doing this, the lender has a better idea about whether the applicant is likely to be a good client and pay back the loan or a bad one who will cost them money.

Detailed Lending Criteria

Your income and ability to repay the loan
Each lender will work out, according to their formula, whether you will be able to repay the loan. They automatically take into account living expenses and will not allow the repayments to rise above a certain level of your income.

If the repayments (based on current interest rates) are over a certain percentage of your take home pay, you will be refused a loan automatically. Most lenders will factor in an increase of interest rates to provide a buffer as well. Use our personal loan calculator to estimate what the level of repayments would be for your situation.

If you currently have other loans and the repayments are a major portion of your income, then this could also be a problem.

Employment
Lenders are looking for stability in employment. Someone who changes jobs a lot or changes industries can give the impression of lacking reliability.

Most lenders will not lend to someone still in their probation period.
Credit Worthiness / Credit History

Almost everyone will have a Credit File and lenders will check it before approving your loan.

Your credit file contains personal information and details of your credit history.

These include details of:

* Previous loan applications made over the last 5 years.
* Current loans.
* Overdue accounts, also known as defaults.
* Current and previous employers.

Some lenders will refuse your application no matter how small an overdue account is. Overdue phone accounts, long forgotten because you moved, can stop you getting a loan.

Lenders record into your credit file if you make a loan application with them. If you make multiple applications, this can be seen as an indicator of financial stress. You should keep loan applications to a minimum and not apply to each and every lender you find.

Residential Situation
A number of lenders will enquire as to your residential situation going back 5 years or more. Moving around a lot is another potential indicator of unreliability or instability.
What to do if your loan application has been rejected.

Fix your credit file
It’s always a good idea to check your credit file prior to making a loan application. It is free and the small amount of time it takes can sometimes save your application. Entries should be checked for accuracy and defaults should be rectified.

Be patient
If you have changed employer and are still within the probation period it would be wise to consider waiting until you are no longer on probation as some lenders will not consider your application until you are considered a fulltime employee.

It could also give you more time to:

* Build up your savings.
* Create a savings track record to show the lender.
* Give you a larger deposit.
* Lower the amount you need to borrow.

Consider a secured personal loan

If you are applying for a personal loan to purchase a new car, consider getting a secured loan. The difference between an unsecured and secured loan is the lender takes control of the car until the loan is fully paid out. Another bonus for getting a secured loan is the interest rate will probably be lower.

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Secured personal car loans are not the only option, despite the excellent value of such personal loans. Unsecured personal car loans can be taken out, but they will usually functions the same as for any other kind of unsecured personal loans. The advantages of secured personal loans vs unsecured personal loans are obvious in terms of personal car loans, but some people may not be able to afford to repay the minimum amounts that secured car loans offer. Starter cars, for instance, may need to focus on affordability rather than quality, so unsecured personal car loans do provide to significant portion of the automobile finance market.

When choosing the right personal loans to serve as personal car loans, you may also want to consider any other aspects of the loans other than just interest rates and fees. Some personal car loans that are dedicated to auto finance will offer bonus features, such as insurance discounts and free servicing from sponsors. These kinds of deals can add real value to personal car loans, but you will need to calculate whether the extras are costing you in other parts of the loan if you want to ensure you get a good deal.

As there are so man personal car loans products offered by lenders, you will want to spend a great deal of time looking at what each of them offer. If this is too inconvenient for you, remember that online personal loans have very fast application processes these days. Some lenders can even confirm approval within a single working day. This means you should have more time to search for good personal car loans than you may have otherwise thought. By staying aware of the amount you require, the interest rate you can afford and your need for any other special features, you should be in good stead to choose excellent personal car loans.

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There are many courses of action lenders can take in an effort to collect unpaid personal loans. If you find yourself in a situation where you can’t repay your personal loan, it is in your best interest to contact the lender immediately. They are more willing to work with you than to turn you into collections. Being honest about your situation will help them explore all the available options with you. In some cases, you can revise the loan to have lower payments or even skip a few payments without it causing a negative impact on your credit report.

The collection process for each lender is different. It is an area you should familiarize yourself with prior to accepting the terms of the loan. If you obtained a personal loan using the assistance of collateral attached to the personal loan or a co-signer than you in a dire situation that requires your attention to remedy it as quickly as possible.

Most creditors don’t care who repays the loan, as long as the funds get paid. Therefore, they have every intention of holding a co-signer liable for the balance due on the loan when the borrower is in default. The creditor may still desire to pursue legal action against the borrower. This can be done by taking the borrower to court. However, due to the time and cost involved they will likely just choose to pursue the co-signer for the funds. If a co-signer refuses to pay, then the creditor is likely to take both the borrower and co-signer to court or send the account to a collection agency.

Neither option works well for the borrower or co-signer. Court costs are expensive and you may need to pay for legal representation. The court can mandate you pay a set amount of money each month, or face the consequences of the legal system. Collection agencies generally will continually hound both the borrower and co-signer with phone calls and letters. They can also choose to garnish your paycheck, greatly reducing the amount of take home income you have.

Secured personal loans that go into default mean the creditor will be taking the asset you tied into the loan. This can be property, a vehicle, or other type of asset. Keep in mind that just because they have that asset, your loan may not be settled. Often, they will sell the asset for whatever amount they can get, and then apply that amount towards the balance due. The remaining balance will still be your responsibility, thus it could result in court proceedings or collections.

To prevent your personal loan from spiraling out of control, make sure you only borrow the amount of money you absolutely need. This will help keep your monthly payments low. Budget each month for repayment of your personal loan. If you have extra funds, consider paying in advance or placing the money into a savings account for emergencies.

Lenders find court proceedings and collections a costly and time consuming part of doing business. They will also collect on any collateral you put forth to secure the loan. They don’t enjoy it, but will take such action as means of recovering the money they lend. It is very important that you contact your lender immediately if you are not able to make a payment. This will allow them to work with you before the issue gets out of control. If you find a lender can’t help you, consider contacting a consumer counseling agency for further assistance.

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