card guide
Secured Personal Loans
More common today than previously, as mentioned above, a ‘secured’ personal loan is where you as the borrower give security over your assets (normally your home) and if you fail to repay your secured personal loan, the lender will sell those assets to repay the loan.

Two immediate issues need to be considered with secured personal loans.  First, do you really want to take the chance of losing your home if you cannot repay the personal loan?  Second, the longer the period of the secured personal loan, the more chance there is that you’ll lose your job.

Unfortunate as it may seem, you have to be pretty certain you can repay your secured personal loan before you agree to take the loan out.  However, the upside to this is that the lender knows this, and also has some form of security if you don’t repay.  As such, interest rates on secured personal loans should be much lower than they are on any other type of borrow – apart, possibly, from a mortgage.

Typically, secured personal loans range from £10,000 to £100,000 and the term of the loan is usually lengthy – more than 5 years.

Interest rates on secured personal loans can be an interesting issue and will need to be given some serious thought.  On the one hand, it is possible to fix the interest rate on the secured personal loan over the period of the loan.  However, as the loan term will be fairly lengthy,  you need to be worried about whether it is likely that interest rates are going to come down in the future. 

Alternatively, you can elect to have a variable interest rate on your secured personal loan.  In most instances this floating rate will be a few base-points (a ‘base-point is a percentage on 100 percent) above the Bank of England’s announced base rate.  Here, however, you need to be concerned with whether or not it is likely that the Bank of England will raise interest rates during the term of the secured personal loan to a level above the interest rate being offered as the fixed interest rate.  If you think it is, then  you would be better offer going for a fixed interest rate. 

Depending on the length of your secured personal loan,  you may also be able to negotiate to have a hybrid interest charge on the loan whereby the first part of the loan term an be at a fixed rate of interest and the second part of the loan term can be at a variable rate, in much the same way as some mortgage interest rates work

Posted on: [ January 05, 2018 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon