Loans
A Guide to Secured Loans
The common form of a secured loan is that it is one set up with some form of security for the lender. If the borrower fails to repay the loan then the lender may take hold of the security and sell it to repay the loan. Much the same thing can occur with a mortgage which is sometimes called a home loan and is a kind of secured loan in that it is secured on your property.
There could be many reasons why you may choose to take out a secured loan. One is that a secured loan is a suitable tool to allow you to raise a large amount of money. This could be used for debt consolidation, home improvements, and many more reasons. It could be that you have experienced difficulty getting an unsecured loan due to a poor credit history. Lenders can take a more lenient view when it comes to secured loans due to the security that you offer with the loan. This means that you could raise the money you require with a secured loan although you may have been declined recently or in the past for an unsecured loan.
What are the qualifications for a secured loan?
You do not have to own the deeds on your property or own your home outright in order to qualify for a secured loan. If you have a mortgage, and have built up or have equity in your property you could take out a secured loan. With a secured loan, you can borrow an amount from ?5,000 upwards and you can use the money for any purpose. Another advantage of your secured loan is the payment terms available, these can be from 5 to 25 years. You need to fully discuss all the terms and conditions of the loan with your lender to ensure the payments term and the amount that you will be borrowing fully meet your circumstance and ensure you can fully meet the payments each month. Secured loans are normally at a lower rate, than their unsecured partner and will normally be allowed to be taken out over a longer term. Also a larger amount may be borrowed with your secured loan as you are offering the lender some security. If you do not keep up with repayments on a secured loan or mortgage on your property your home may be repossessed.
There are many factors that can account for the interest rate that you will be charged on your secured loan. Some of these are the amount and term of the loan and the loan to value that the lender is taking into account, which is the difference between the total amount of loans secured on your property and the value of your property. They will also take your personal finance credit history into account. A factor to discuss with the lender when discussing your secured loan is a payment protection plan for your peace of mind as well as the lenders of your secured loan. This would save you having to worry about the monthly payments should you fall victim to, sickness, accident or redundancy. There are different types of plans available and the lender will supply you with these details on request.
So what are the benefits of a secured loan?
I would speculate the main benefit of a secured loan is that you can receive lower monthly repayments and can borrow a larger amount of money with a secured loan than you could with an unsecured loan. The amount of money that the lender will allow you to borrow is greater due to the security you are offering. There are some lenders in the market place that will allow you to borrow up to 125% of the value of the property with your secured loan. This is of course subject to the lenders terms and conditions and your credit status. For you to be able to take out a secured loan the lender would like you have been a homeowner for at least nine months or longer. You can take out a secured loan whether you are employed or self employed and even people who have pensions in place can still qualify for a secured loan subject to meeting the lenders terms and conditions.
Your secured loan, as with any loan, may be redeemed early although the lender will charge you an early repayment or early redemption fee for paying off your secured loan. So in essence if you are looking to borrow a large amount of money, would like to take it out over a longer term, and would like to have payments that are affordable to you and you have equity in your home then you should consider a secured loan.
Mike Trusler is the founder of Deal Finance Ltd helping people to find finance in a world full of jargon http://www.sunsetloans.co.uk |
Mike Trusler
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