Secured Loan Advantages
30 Aug 2007 Tell a Friend
Secured loans offer an ideal way to borrow large amounts of money against an asset you already own. By far the most common kind of secure loan is the standard mortgage. In this case, the loan is usually secured against the home itself. If the borrower defaults on repayments, the lender has the right to take possession of the home. Another common kind of secured loan is the "further advance". The further advance is usually made against your home when you want to borrow extra on your mortgage.
One of the chief advantages of the secured loan is that they usually carry lower interest rates because there is less of a risk for the lender. Because of this, the lender may also be more flexible, and they may allow you to tailor the loan to your specific needs. You may have a say in setting the term of the loan and the amount of the repayments, which will allow you repay the loan comfortably and avoid financial pressure.
Secured loans are usually repaid between three and 25 years. However, as with a mortgage, you may be penalised if you want to repay in full before the term of the loan ends. Check your lender?s policies on this and insist on more flexibility if you think you might be able to repay the loan early. Repaying early could save you a significant amount of money on interest repayments.
In many cases, secured loans are the only option. For example, the self employed and the unemployed often have difficulty obtaining loans, as do people with a poor credit rating. Banks will usually be willing to provide a secured loan in these cases. Secured loans often provide an opportunity to borrow significant amounts of money. For example, a homeowner with a sound credit history and a good regular income may be able to borrow up to 125 percent of the value of their home. This would be ideal for someone looking to buy a second home or, maybe, start up a business.
Secured loans are usually in the range of £5,000 to £75,000. Interest rates on offer from high street banks at the moment are usually around the 7-8 per cent mark, although these will fluctuate as the Bank of England adjusts its interest rates. Secured loans also offer an opportunity to free up equity in your home. This is a very common method of releasing capital for people who may want to extend their home, place a deposit on a new home or simply buy that new car or go on a dream holiday.
Owning valuable assets opens up the valuable option of being able to apply for a secured loan, and to possibly borrow a significant amount of money for your particular needs.