Secured Loans

Secured Non-recourse Loans

Finding secured non-recourse loans can be of great advantage to you if you are planning to take out a large scale loan in the UK. Credit products can be a great way to raise a quick amount of money for any number of important purchases. The best of these give as much benefit as possible to the borrower and come with a lesser amount of risk. Though secured loans will always have a greater level of risk than unsecured as they require an asset as collateral, getting a non-recourse loan helps give the borrower security too.

Secured Vs. Unsecured Loans

Before we look into non-recourse credit it is important to consider the differences between secured and unsecured loans. Unsecured debt means a loan taken out with no collateral and granted only on the basis of the borrower's ability to borrow. Therefore, while an unsecured debt may well harm your credit if you default on it, it will not cause any of your property to be seized by your lender, at least not directly. Secured loans, on the other hand, has been granted on the basis of an asset being put up as collateral, such as your home or car.

Though this would seem much, much riskier, as defaulting means losing your property, there is a definite argument for secured loans being much easier to manage. Firstly, they will always pay off better than an unsecured loan and forward much better capital amounts. Secondly, because the lender has the security of your asset they are not in such a hurry to make money from their investment so will give you a much longer term of repayment and a much lower interest rate. In order to get even more benefits from secure lending, however, you may want to look at secured non-recourse loans.

How Non-Recourse Works

Secured non-recourse loans come with a very interesting added incentive for the borrower. Say you take out secured non-recourse loans against the value of your property. Halfway through payments you lose your job and, in the ensuing months, miss several payments to the lender and default on the loan. Your lender will still have the right to take your property but, importantly, once the property is seized they will no longer be in line to ask for any more payments from you, even the ones you missed prior to default. This extra security can come as sweet relief should you ever be in danger of defaulting and money is tighter than ever.

You may well be wondering why every borrower does not, therefore, take out secured non-recourse loans when they look for some asset backed credit. The answer is they are not always that easy to come by. First off, the borrower needs an excellent credit rating to apply for a non-recourse product. This does not just mean a decent one but a perfect record of borrowing and repaying from credit institutions. The lender is already committing to a high risk product so they will not do so with a high risk customer.

Also lenders will be highly unlikely to grant secured non-recourse loans against a commercial property so landlords or hoteliers will have difficulty finding these types of products. Commercial assets are also high risk in nature due to the ever changing market for business properties so adding non-recourse potential will not be good for the lender. Keep in mind too that secured non-recourse loans generally need to involve a pretty large amount of capital to make it worthwhile for the lender. For some lenders the minimum amount lent in this kind of deal may be anything up to a half million.

Advice on Defaulting

Though none of us ever take out a loan of any kind with the intention of defaulting, you must be prepared for the possibility as the chance is always there. If you took out secured non-recourse loans you have the cushion of not needing to pay more once the property is seized but you still don't want to lose the property. The good news is most lenders are unlikely to seize until you have missed about three to four months of payments, so when things get bad you generally have some time to repair the situation. You may want to contact your lender should you think you are going to miss payments on your debt and see if you can change the terms to make it more manageable before you default.

If you are looking for a loan in the UK and need a pretty high amount of capital you will probably be looking into secured loans. Adding a non-recourse variable to these products can give you even greater security. Therefore you should consider the benefits of secured non-recourse loans before you purchase any credit products.