There are times in our lives when simply saving our pennies is not going to be enough to afford what we need. Sometimes we need something specific and expensive, and the only way to achieve it is to do it by using finance. When it comes to buying a house or a new car, we’re likely to approach a mortgage company or the dealership directly. In these cases, we can often take advantage of the current offers, deals and marketing strategies that ultimately help us attain what we need.
In other situations we may only need a modest amount of cash. In these situations it may actually make sense to simply save up, or use our credit card or overdraft to cover the difference. It may even make sense to use a payday loan company and pay the small amount back once our next monthly salary goes into our bank accounts.
But what about everything in-between?
There’s an awful lot (in terms of credit) between a mortgage and a payday loan. Most borrowing and credit arrangements are generally somewhere within this category, yet these are the credit options that people seemingly don’t know as much about. These are the situations when a payday loan may not be enough, but we’re not in a position to get credit from the supplier directly.
Any amount can fall into this category if we’re being honest, but a popular choice is a $5000 loan. An injection of cash of this amount allows us to achieve many things; we could buy a second-hand car, consolidate existing debts, do some home improvements and many more things. $5000 is a solid amount of money and can be used for multiple uses but it’s also a long-term commitment. Repayments are likely to be made over several years depending on the situation. It’s also worth considering whether or not take out a personal loan or a secured loan.
What is a secured loan?
A secured loan is one that is secured against your property. An extension to the mortgage is an example. For homeowners this is usually fairly straightforward to get, that’s because the customer already has a significant amount of credit with their chosen lender and has demonstrated they can pay it back every month. Providing the customer’s financial or employment situation hasn’t changed, the lenders are normally happy to extend the line of credit. Should the customer default however, then the consequences can be dire and eventually lead to the house getting repossessed.
Secured loans are usually the first port of call for homeowners. For them it makes sense to simply extend their mortgage with a secured loan with their existing lender instead of seeking a new loan with a new lender. As they’ve already built up goodwill with the lender and have an existing relationship, why go elsewhere? The customer is also usually planning on paying it back and not defaulting, so in this situation they’re unlikely to even consider any other options.
A secured loan is typically used for home improvements, this is another reason why the customers often choose to apply through their mortgage provider. As far as they’re concerned this is just part of the mortgage and that makes sense. Lenders understand this too which is why they are often lenient and open to providing this form of credit. A loan of $5000 is usually enough to afford home improvements providing they aren’t major renovations. Bringing a home up to date also adds value to the house, and overtime, this can be seen as a worthwhile investment. By the time the customer sells the home with the improvements completed, it usually makes this $5000 back along with profit.
Payday Loans Scale
Personal loans
The second form of $5000 loan is a personal loan (sometimes referred to as an unsecured loan), the main difference between these and a secured loan is they are not attached to the house in anyway. Not paying one back won’t lead to repossession, but it can heavily damage a customer’s credit rating. Where a secured loan is often used for home improvements a personal loan is typically used for everything else.
There are many instances in life where an amount of $5000 can be useful and it may not always be home improvements. One of the most common reasons for a personal loan is help buying or maintaining a car or other vehicle. Not everyone wants to buy a new car from a dealership, considering it too expensive or a poor investment. A loan of $5000 can be an ideal amount for this. It’s often preferable to pay back a loan company instead of a car dealership. The interest rates are likely to be cheaper and it can also keep the debt consolidated.
Consolidation loans
Another popular reason for a $5000 loan is to consolidate existing debts. This is when the customer applies for a loan with the intention of using it to pay off current loans or credit such as an overdraft, credit card, store cards or previous loans. There are plenty of advantages to doing this, for example interest rates may have come down since the previous loans were taken out. Perhaps the customer is struggling to keep up payments on multiple debts and now they are receiving additional charges.
Applying for one loan, then using that to pay off all the other debtors, can be an effective way to reduce the monthly cost that the customer needs to find every month. It also allows them to take control of their finances and liaise with only one company instead of several. With no more extra charges from their overdraft, credit card and elsewhere, the customer can simply focus on finding the money for their new loan every month. And save themselves a fortune in the long run by securing a more favourable rate of interest.
If you believe a $5000 dollars loan could help you in any of the ways listed above, then we’d strongly recommend using a personal loan comparison website to see who has the best rates and reviews.