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Secured Personal Loans

Suitable if you home owner and have a good credit history. On average, secured loans offer a lower interest rate than unsecured loans as the lender has less to lose.

A secured loan is any loan that requires the borrower to provide the lender with some form of security. In most cases it will be secured on your home, regardless of whether it is mortgaged or owned outright. Loans secured against property that is already mortgaged are known as second

charges, where as loans secured against a property owned outright with no existing mortgage in place are known as first charges.

One of the most vital points to understand about a secured loan is that it is not best used as a solution to debt problems, because it is very important that you have budgeted properly to cover the cost of the loan payments. Many people with debt problems have them precisely because they are not good at budgeting to cover loan payments, and if you get it wrong with a secured loan you could end up losing you home.

Secured homeowner loans are available in varying amounts and for many different purposes, including debt consolidation. The amount available usually ranges from £3,000 to £55,000, although a small amount of lenders will consider lending up to £100,000. The amount borrowed is normally repaid monthly over a term agreed at the start, which will usually range between three years and twenty-five years. You may be charged a penalty if you repay your loan earlier than agreed, and you should check each lender's individual policy with regards to this as it may cost you in the long run.

There are 4 differences between secured and unsecured loans, and these may be important if you were a homeowner deciding which type of loan you would like.

• No.1 - Secured loans tend to offer lower interest rates, which is a by-product of the reduced risk to the loan company of providing the loan to you. You will find confirmation of this by using a search and select application for loans, asking to see rates for secured and then unsecured loans for the same amount and term, and comparing the rates on offer.
• No.2 - You are far less likely to face immediate or serious court action from the provider if you default on a payment. Providers know that they have the security of taking your home to back up your debt, so in general they will give you more time to recover from not keeping up your payment. There is no guarantee of this though it depends on the lender, so you are advised to make sure that you can make all of your repayments before you make an application.
• No.3 - You will find that it is much easier to be approved as, You are putting up your home as a guarantee that you can repay, which is great odds for a provider, so they will be more likely to approve you.
• No.4 - You will also find, however, that the whole application process will a little bit longer. The provider will probably need to value your home, which can take some time. But in the end, it should be worth the wait, as you can get a far cheaper rate.

 

Lenders charge interest on the amount you borrow, which is referred to as the Annual Percentage Rate (APR). The amount you can borrow, the term available and the APR will all depend upon the equity you have in your property, the lender's view of your ability to repay the loan and your personal circumstances, for example any adverse credit.

Subject to your circumstances, you may be able to borrow up to 125% of the property value depending on the lender. The APR’s quoted by the lender will usually be typical rates, and these act as a guide only as the exact rate offered will be on an individual basis. As a general rule, it is advisable to compare the APR’s of different loans, as this is a good way to determine how competitive they are.

Generally, secured loans are much easier to obtain than unsecured loans. This is because the lender has the added benefit of security, which provides protection in the event of a customer's inability to repay. So if a person is self-employed, or has recently changed jobs, or has adverse credit they will stand a better chance of being accepted.

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