The Best Secured Loans - Best-Loans.org
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Best Secured Loans |
When a person wants to renovate their house, pay for a wedding or even consolidate debts, they will consider applying for a loan.
There are two main types of loans, an unsecured loan and a secured loan. The secured loan is used exclusively for homeowners. This is due to the understanding that the home is used as collateral for the loan. Therefore meaning that if at any time you are unable to make the loan repayments, your home may be repossessed. The normal form of collateral used for these loans would be property, although in a few cases other high value assets would be accepted, for example a fleet of vehicles. This type of loan is usually used when a high amount of money is to be borrowed.
A secured loan is also known as a homeowner loan, a second charge loan (as a homeowner your loan will be secured on your property by means of a second charge loan. This loan will not affect your existing mortgage, therefore meaning that if your house is repossessed to settle the loan, you will still need to pay your mortgage payments), or a first charge loan (a loan that is secured against your property if you own it outright).
There are a number of benefits of having a secured loan which include if you have bad credit or no credit rating you will generally be accepted for the loan because your home will be used as a form of security (collateral) for repaying the debt, you will be offered very competitive interest rates as the loan is guaranteed against your property, you will have a wider choice of repayment periods than an unsecured loan. Some organisations allow you to repay the loan from 3 to 25 years and you would normally be able to borrow up to £250,000.
Although it is a benefit to be able to pay a loan over a longer period as it will reduce the amount to be paid monthly, it can also be a disadvantage as the longer the length of time you pay a loan over, the more interest you will pay in the end. Therefore, meaning the initial amount of money you borrowed would be a significantly higher amount paid back. For example if you borrowed £5000 over 5 years you will pay £6035.36 including interest making the monthly payment £100.59, whereas if you borrowed £5000 over a period of 25 years you would only pay £37.50 per month but will end up paying a total of £11249.30. That is £6249.30 (more than your initial loan) in interest compared to £1035.36 that would be paid over the 5 year period.
Before applying for a secured loan it is highly advisable that you consider all the aspects of the loan. You should browse the loan markets ensuring that you compare all interest rates/ APR rates (annual percentage rate) – some companies will charge a lower APR than others. The amounts would also vary with the loan amounts, the higher the loan the lower the rate, Early Redemption Penalty fees – a number of companies will charge this if you decide to pay the loan amount back early. This could be around two month’s interest, monthly repayments – you must ensure that you are able to repay the monthly payments comfortably as your home is at risk if you do not.
The amount of money you can borrow with a secured loan generally depends on the equity in your home, the higher the equity the higher the loan. A secured loan can be made against a home whether it is under mortgage or owned outright. The amount of the loan can depend on a number of factors, particularly how much the owner owes on the property in comparison to the value of the property. The larger this difference, the increased possibility of a larger loan. Of course, the borrower's credit rating and amount of current debt will also be a factor. This would be discussed with the loan provider on application of the loan.
These loans are typically of a high amount. If you only require lending a small amount of money over a short period of time, it may be worth applying for an unsecured loan.