There are quite a number of loan types that fall under the secured loan category but the most common and most availed by borrowers in the UK is the secured homeowner loan. If you’re planning to take a secured loan, this quick guide should help you understand the financial product better.
What is a secured loan?
A secured loan otherwise known as homeowner loan is available only for borrowers who are property owners or mortgage holders. When you apply for this loan, you will essentially secure the said loan against your property, which means you can borrow a larger amount than what traditional bank or personal loans can offer.
Typical homeowner loans for UK borrowers offer up to £75,000 or sometimes more depending on the value of your property and your financial capability. You can use the loan to meet a number of financial needs such as home improvements, travel or vacation, medical expenses, business investment and debt consolidation.
Why choose a secured loan?
Secured loans are advantageous in a number of ways. As already mentioned, this type of loan allows borrowers to borrow a larger loan amount. With a secured loan, you can meet a wide variety of financial needs as opposed to an unsecured loan with smaller loan offers. Because lenders have your property as security, the interest rates are typically lower or cheaper. Even if you have a less than stellar credit rating, a secured loan will still allow you to avail a larger loan amount at a cost you can afford.
Secured loans are also easier to avail. So long as you have a property to use as security, you can get approved quickly and without hassles. In addition, borrowers can also borrow money over a longer repayment period. Loan terms vary from deal to deal and you can choose which terms suits your situation best from five years up to 20 years.
Why not choose a secured loan?
While certainly attractive and widely available across UK, there are a few downsides to keep in mind when applying for a secured loan. Because your loan’s approval relies heavily on your property, this financial move is something you need to think through as thoroughly as you can. It’s not something you avail just because it’s accessible and available.
With your property on the line, one of the biggest downsides you need to think about is the risk of repossession. Your lender as per the loan terms can forcibly repossess your house and sell it to pay off the loan. This move is often carried out when the borrower can no longer repay for the loan. If the resale price fails to cover your loan balance, the lender can still run after you for payments.
How to find the right secured loan?
Considering the pros and cons, secured loans are the type of loans that should be taken with caution. In fact, most experts would recommend to only consider the loan as a last resort. Only if you’ve exhausted other alternatives should you risk putting your home or property at risk. And if you do decide to avail the loan, it’s important to make sure that you find the right secured loan deal for your needs.
To find the right deal, you always need to start with your needs. You may use top comparison sites to help you wade through your options. You may also seek recommendations and even enlist the help of a financial expert to help you plan your borrowing responsibly. In any case, the trick at the end of the day lies on you committing to pay off the loan on time month after month.