When you need a substantial sum of money to extend your house, upgrade your electrical appliances or pay for a medical bill, using your property as collateral gives you the leverage you need to qualify for a larger loan. With secured loans, property such as a house, an automobile or expensive equipment serves as a guarantee that these loans will be repaid. Secured loans offer greater financial flexibility and more favourable terms than unsecured loans, and if you own property that can serve as collateral, secured arrangements are often easier to obtain.
All loans represent a serious financial commitment, but when your agreement with a bank or building society is secured by your home, the tools of your trade or your source of transport, there's a higher element of risk involved. If the loan is not repaid, the lender has the right to repossess the property that you've put up as collateral. When you're sourcing secured loans, use an online loan calculator to determine how much you can afford to borrow at the lender's proposed interest rate.
Obtaining a Loan
High street banks, building societies and specialist lenders offer secured loans, often at very competitive interest rates. When these loans are secured by a home, they are also known as homeowner's loans or second mortgages. The application process for a secured arrangement is fairly simple, and you can apply online or in person at the financial institution.
When you apply, you'll be asked to provide your personal details, including information about your employment and your income. The prospective lender will also inquire about your credit history. If you have a history of a County Court Judgment, a bankruptcy or missed repayments on another debt, obtaining the most competitive interest rates may be challenging. On a positive note, if your agreement can be secured by a car or house, you'll have a much better chance of borrowing the sum you need from a reputable lender.
With a secured contract, you may generally borrow a substantial sum of money at a competitive interest rate with a longer repayment period than the average unsecured agreement. The stronger your financial history and the more valuable the property you're offering as collateral, the more you may be able to borrow. If your credit score is lower than average, you may pay higher interest rates, regardless of the value of your property. To lenders, a low credit score indicates that the borrower presents a higher level of financial risk.
As you source secured loans from multiple financial institutions, take care to limit your search to reputable lenders. When your house or car is at stake, the last thing you want to do is to enter a binding agreement with an unlicensed, unreliable lender. Reliable lenders are licensed by the Office of Fair Trading, or OFT, and have a strong reputation for maintaining high ethical standards in issuing their loans.
Repaying personal secured loans is quite similar to repaying any other debt, only there's more at stake. With secured loans, it's important not to fall behind in your repayments, because the consequences of defaulting on the agreement can be severe. Before you sign a contract with a lender, make sure that you can comfortably fulfill the terms and conditions of the agreement. The interest rate and repayment installments should be affordable enough that you can keep up with your obligations for the term of the contract.
Most lenders are reasonable enough that they will not attempt to repossess your property after one missed repayment. Life is uncertain, and any borrower can encounter adverse circumstances, such as an extended illness, an injury, a job loss or a divorce. Before repossessing a home or other assets, the financial institution must initiate legal action, which may be a lengthy process. However, if the asset is repossessed and sold, and the value is not sufficient to repay the debt, you may be held liable for the shortfall.
If you fear that you might fall behind on repayments for secured loans, contact your lender immediately to discuss your concerns. The sooner you address the problem, the more likely you are to arrive at a solution. To protect your loan, you may invest in payment protection insurance, which covers repayments if you encounter adverse circumstances. Income protection insurance is a more general form of financial coverage that covers your bills if you are made unemployed due to illness or injury.
Secured loans have enabled many property owners to achieve their financial goals and improve their personal circumstances. Whether you're borrowing funds to consolidate debt or make improvements in your house, your arrangement will give you the cash you need to reach your objective. Before you accept an offer, compare rates and terms from multiple lenders with a solid reputation in your area.
Secured Loans Resources
Secured Online Loan
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Secured Loan Calculator
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