A Secured Loan Could Save You Money
A Secured Loan Could Save You Money
What is a Secured Loan?
A secured loan is any loan that is secured on your home or property.
It is any loan which requires you to provide the lender with some
form of security other than just a promise to pay. The security will
be your property or home. The property may be mortgaged or owned
outright.
If you agree to a secured loan on your home, you should remember
that, although the property remains in your possession, it can be
repossessed by the lender if the loan and the interest are not paid
according to the agreed terms. The lender will then sell the
property in order to recover the money you borrowed plus any
additional costs incurred in recovering the money.
Secured Loan Benefits
In many instances secured loans can be repaid over a longer period
with a lower monthly repayment. The interest rate will be lower on a
secured loan than on a comparable unsecured loan. A secured loan may
also offer more flexible repayment periods.
1. If you’re a homeowner, you may get a lower rate through a
secured loan using your property as security. By taking out a
secured loan, you are agreeing to allow the forced sale (foreclosure
or repossession) of the asset in order to pay back the loan. The
risk to the lender is reduced so the interest rate offered is lower.
This is why secured loans tend to be cheaper than unsecured loans
and other forms of borrowing. The lender has the added benefit of
security, which provides protection in the event of your inability
to repay.
2. Secured loans are more easily accessible to those with a poor
credit record. This means that persons who are self-employed, or who
have recently changed jobs, or who have adverse credit (ccjs,
arrears, defaults, etc.) can take out a secured loan.
3. You can borrow larger amounts and repay over a longer period. The
amount available usually ranges from £3,000 to £50,000, although
some lenders will consider lending more. Compare this to unsecured
loans where you’re only allowed to borrow up to £25,000. If you wish
to borrow a larger amount or if you require a longer period in which
to repay the loan, secured loans may be the most suitable for you.
4. You can consolidate more expensive borrowings into a single much
cheaper monthly payment. You may choose to take out a secured loan
in order to consolidate debts and replace high-interest loans with a
low-rate loan. The loans being consolidated may include higher
purchase loans, unsecured loans and credit cards.
Useful Points to Remember
Before you take out a secured loan, make sure that you can afford
the monthly repayments. Also, read the loan agreement carefully and
pay particular attention to the rate of interest required, the term
of the loan, the repayments required and the total amount payable.
If you fail to repay the loan, the lender may repossess your
property or home and sell it to repay the loan. If you borrow money
using a mortgage as security you are agreeing that the lender can
claim the mortgaged property if you fail to keep to the agreement.
Your home is at risk if you do not keep up repayments on a mortgage
or other loan secured on it. You can read some more articles about
secured loans at: http://www.commercial-mortgage-guide.org.uk/loanguide/
© Copyright 2005, Bwalya Mwaba writes for the The Commercial
Mortgage Guide. Visit our website for mortgage related news,
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