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Secured Loans - What You Need To Know
It's not always easy to manage your finances in the face of unforeseen or large expenses. People might have to deal with costly occasions and events such as:

  • family weddings
  • school fees or other tuition fee
  • home improvements
  • purchasing a second or holiday home
  • buying land
  • getting a new car
  • having an expensive holiday
  • starting a small or home business.

All of these can take a bite out of the family budget and using a credit card may not be the most cost effective way to manage this financial burden. Some loans attract such high interest rates that repayments may be difficult to manage. Luckily, there is another option for people facing large expenses and it also works for people who have a poor credit history with CCJs, defaults and arrears. It's called a secured loan or homeowner loan.

What Is A Secured Loan

A secured loan is a loan which is secured on the value of a house. This type of loan is suitable for a homeowner who wants to borrow a sum of money based on the equity in the home. Lenders will typically lend up to 85% of the value of the equity in a home, though some may lend as much as 125% if the borrowers meet their lending criteria. Some lenders require a valuation of the home before agreeing on a loan amount. Repayment periods tend to be longer than the 10 years typical of unsecured loans. Most secured loans have repayment periods of up to 30 years.

To get a secured loan, borrowers do not need to own their house outright. Loans can also be secured on mortgaged properties. Lenders will take a first charge on a property that is owned outright and a second charge (after the mortgage company) on a property that is mortgaged. This means that if the borrower is unable to repay the loan, the lender will be repaid from the value of the house. Secured loans tend to have lower interest rates because lenders have this added security.

How Do I Get A Secured Loan?

The best way to get a secured loan is to shop around. There is plenty of information online and offline. There are also many loan comparison websites where borrowers can compare deals and apply online. Lenders usually ask for home ownership details, the amount of the loan, name, address, marital status and other personal information. They will usually ask for the purpose of the loan, though they do not really need this information.

There are hundreds of types of homeowner loans available in the UK. Homeowner loans can be arranged through brokers or through the companies. Loans over £25,000 are unregulated, so it's worth making sure you are dealing with a reputable company by checking them out with the Financial Services Authority. Every lender has different terms and conditions and interest rates may vary. Borrowers should read the fine print before deciding on a loan.

How Do I Manage My Secured Loan?

Secured loans can be useful for raising large amounts of cash, particularly for homeowners with a poor credit rating. However, it is essential to make the required repayments on time and in full. Not only will defaults and arrears damage borrowers' credit rating, but they could also result in the loss of borrowers' homes. So as well as reading the fine print, borrowers should make sure they can make those repayments before signing on the dotted line.

Posted on: [ November 02, 2017 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon