Secured Loans

Secure Loans

Secure loans offer the borrower many potential benefits that are worth considering by anyone who is entering the UK credit market. For many people the idea of taking out secure loans or automobile secured loans is a worrying one. While an unsecured loan comes only with the risk of damaging your credit a secure product also puts whatever asset you back it up with on the line. If this is a home or a car the effects of defaulting can be devastating so, for some, it is better to stick with the less risk heavy unsecured lending. This, however, does not take into account some of the great benefits of asset backed loans.

In fact, if used correctly and taken from the right lender, secure loans can actually be far more risk evasive than the unsecured variety. Though that may seem like financial heresy it is true and the following guide will show you how. So, if you are in the market for credit and are not sure what form of product to take out, take some time to consider the pros and cons of secure lending. It might be exactly what you need to make the purchase you require on the right terms.

Benefits of Secured Loans

Unsecured lending may come with less of a property related risk but it also comes with a much lower value. When you take out a product from a lender with no security they will be more wary about the kind of benefits, discounts and rates they offer to you. As there is no asset to back up their investment they have no guarantee that their demands will be met so they will want repayment as quickly as possible. This might mean a very fast turnaround and high interest rates on the deal.

With secure loans this is not a problem as the asset you used to secure the deal is there to prove your interest in it. The potential risk of foreclosure on your property means the bank or lending institution is less worried about you defaulting because they are aware of how high the risk is for you. The lowered risk also means lowered interest, so the overall price of secure loans is less than unsecured products. All these benefits do, however, weigh against a pretty large disadvantage which cannot be ignored: collateral. The asset you use to secure these loans is always on the line if you should default.

Defaulting on Payments

The bad news as regards defaulting is that, legally, once a borrower misses a single payment on a secure lending agreement the lender has the right to seize whatever property was put up as collateral. The good news is that this rarely happens as lenders have little interest in taking your home or car. They would much prefer the money to paid back to them in full and if that means giving the borrower three month or so to make up on arrears they will do that.

If you continue to miss payments, however, there will be problems and you may be in a situation where you are going to lose the asset. If you are facing this possibility there are a couple of options you can consider. Many in the UK take out more loans to cover the cost of repayment and, though this can work in the short term, it is a massively risky move. If you are sure that your budget will allow you to take care of two high cost debts and interest rates at once then it may work out but taking on more loans, secure or otherwise, is rarely the answer to defaulting.

You might consider the possibility of simply contacting the lender and seeing if your loans terms can be renegotiated. This may or may not bear fruit but it is worth considering if you feel you are heavily at risk. Secure loans companies are most concerned with their money being repaid and if changing the terms of payment or slightly adjusting interest rates does that they will be open to the possibility. Then again they may not but it is worth finding out should you be struggling with secure loans.

Many people in the UK now use secure loans as a means to raise quick, large scale credit at advantageous rates for big purchases. Though this form of lending does not appeal to everyone, it represents a very beneficial set of terms for those who do. With lower interest and longer terms of payment, not to mention larger levels of capital, secure loans offer plenty for the borrower to consider when choosing their loan. So, look into how secured lending might benefit you and help you make the purchase you need. You might be surprised by how beneficial it can be.