Secured Loans
What is a secured loan?
A secured loan is a loan where you ask your lender to provide you with money at an appropriate interest with an appropriate term. But in order to perhaps get an approved interest rate, the lender will take security over an asset. The most common asset that is used to secure loans is somebody's property, their homes.
What is an example of a secured loan?
A secured loan is a loan where you ask your lender to provide you with money at an appropriate interest or an appropriate term. But, in order to perhaps get an approved interest rate, the lender will take security over an asset. The most common asset that is used to secure loans is somebody's property – their house.So what is an example of a secure loan?A secure loan would be for an amount, say, 20,000 pounds over a period of 20 years and secured against somebody's house, and often that would be where they've got an existing mortgage of, say, 100,000 pounds against a property worth 200,000 pounds. Many lenders will advance that type of money at a competitive interest rate for that individual.
What are the benefits of a secured loan?
A secured loan will give you a lower interest rate usually and also the ability to borrow a higher amount than in the unsecured loan environment. The benefit to the customer of that is that they will have to pay less per month in order to repay that loan over a period of time, because it's both over a longer term and the interest rate is lower. So, both have an impact on the amount that has to be repaid each month.
What are the drawbacks of a secured loan?
The time it takes to complete a secured loan can be a major drawback for some people. However, in comparison to a mortgage it takes less time. It takes more time than on an unsecured loan. This is because the consideration periods on a secured loan are longer than those in the unsecured loan environment. Also, there are issues in that you may have to take legal advice, and you may have additional fees and costs to pay on a secured loan as opposed to an unsecured loan.
What are the risks of a secured loan?
If you fail to meet your repayments on a secured loan, then you may end up with an adverse credit history, a bad footprint on your credit history. If you fail to repay the loan in total, you could lose your property, which is not a good place to be, or you may have county court judgments registered against you. Also, the risk of losing your home is a significant one, and one that should not be entered into lightly. Other risks are that you need to be careful in terms of shopping around to find the right lender. There are a number of people out there who apply different interest rates in order to secure your business.
Do I need to own my own home to get a secured loan?
Secured loans can only be provided to people who own their own properties. However, the main feature of a secured loan is that it sits on top of an existing mortgage. People who've got existing mortgages top up their borrowing situation by taking a secured loan.
What is a 'consideration period'?
A consideration period is a period of time that the lender must give you to look at the documentation in relation to the loan. During that period, they should not make contact with you because if they make contact with you in that period, they've invalidated the loan documentation. It's the period where you have time to give to consider what you are entering into, in order to make sure you're happy with the amount of money you're about to borrow and that you can meet the payments that are required.
