If you?re thinking about a way to consolidate debt, fund your child?s education or pay for home improvements, a secured loan might be a good option. We?ve compiled some tips on the process and fees associated with applying for a secured loan.
A secured loan is a loan that is guaranteed by some collateral, usually a house. Therefore, making the decision to get a loan that is secured by your home takes some thought and careful planning, as you could lose your home if you?re not able to meet the repayment terms.
First you will need to create a realistic budget of what you can afford every month. Lenders will be evaluating your application based on several factors. One is your debt-to-income ratio. By knowing upfront what you can pay, you?ll save yourself the headache of applying for too much loan that you won?t qualify for. Many online lenders and advice sites (such as this one) offer loan calculators which can help you determine what you can afford.
You?ll also need to check your current credit report. By making sure your credit report is accurate, you?ll be able to negotiate for the best rates. If you do have inaccuracies, get them corrected before you apply for loans. For those that have poor credit, you can still qualify for a secured loan. Secured loans are one of the easiest types of loans to get because the lender has your home as collateral.
Comparison shopping for lenders will save you money. Be sure to check out your existing bank or credit union, as well as online lenders to find who has the best rates and loan terms for your situation. Shop around by comparing the loan terms, types of loans, APR, monthly payments, and fees. It is recommended to not apply for too many loans, as this can affect your credit. Your credit will be lessened each time a lender does a credit check. Before you submit applications to every lender that is offering a low rate, make sure you do your homework on the lender.
The fees associated with a secured loan can include administrative fees, transaction fees, broker fees, third party fees, and exit fees. Many lenders will negotiate the fees with you, or they may not charge certain fees. They are not mandatory fees. Make sure they provide the information on their fees upfront so you?re not unwittingly paying more for your loan that you had anticipated.
Once you?ve found a lender, they will have you complete their application. They will check the value of your home with a surveyor. After the survey report has confirmed your home?s value, your lender will inform you if you?ve been approved for the loan. While it does take time to process applications for secured loans, generally they are easier and more quickly approved than for a new mortgage or an unsecured loan.