At a time when getting a loan is no longer an easy financial option it is important to apply for the right loan and only the amount you need. The credit crunch has resulted in banks tightening their lending criteria and only lending to selected people who fulfil their wants and needs.

Both secured and unsecured loans have pros and cons, secured loans usually offer large sums of money for appealing low interest rate. With a secured loan the most vital fact to remember is it is secured against an asset belonging to you, this will usually be your home.

You can apply for a loan through most high street banks and building societies, most people seeking credit opt to go with their personal bank or building society.

Unsecured loans do not have the same risks as secured loans but the amount of loan you can get is significantly less. Comparing the APR on unsecured loans is the quickest and easiest way to work out exactly what rate of interest you will be liable for and what loan is best for you.

For borrowers who are not homeowners an unsecured loan is the way forward. Borrowers choose unsecured loans to purchase a huge range of products this includes a car, a boat, furniture and holidays.

Most of us will take out a secured loan at some time in our lives because a mortgage is a secured loan. Other purchases people use a secured loan for include home improvements and cars. With a secured loan you risk losing the asset the loan is secured on if you fail to make repayments.

On both loan options interest is applied, the interest rate can be fixed or variable depending on the loan product you apply. If you like to know exactly what you are paying each month a fixed rate will suit you.

When you apply for a loan it is also worth considering payment protection insurance (PPI) PPI is insurance that covers the borrower in the event of illness, an accident or unemployment.  If any of these happen and you have PPI your insurer will make payments to your loan account. 

PPI will usually be offered to you through your chosen loan provider but this may not always work out the most beneficial. You should compare different policy providers and select the one suitable to your requirements. Some insurers do not pay for an initial period or only pay part of your monthly loan repayment, you should check this before agreeing to cover.

PPI is not a legal requirement but some lenders automatically set up insurance for you, if you notice this has happened contact your lender immediately and advise them that you do not want the cover they should cancel the policy and refund you the money wrongly taken from you.

PPI is for any borrower but more so for those looking to take out a secured loan as failure to make payments has severe consequences. An industry official commented that insurance of any kind should be strongly considered before rejection. It may seem like a waste of money but no one knows what life has in store for them and if they were made redundant next month how would they pay there monthly payments?