Secured loans UK


Secured loans : UK overview

Secured loans enable homeowners to borrow capital and offset some of the risk against the value their property. On a practical level this means that anyone taking out a secured loan is effectively using their property to guarantee the loan. Of course if the borrower continually falters with repayments the consequences could be disastrous. On the other hand; secured loans have a number of distinct benefits over other types of borrowing.

Lower risk means that banks and building societies can pass-on some of their savings (made on insurance etc) by offering much better interest rates to property owners. However, attractive Annual Percentage Rates aren't all they have got to offer.

Today secured loans come with all sorts of flexible repayment terms, so its' important to read the small print. Clauses to keep an eye out for include: "payment holidays" whereby you can halt repayments for an agreed period of time in order to divert capital elsewhere (say to help with the costs of a wedding or newborn child) and favourable redemption charges - so you won't be stung if you want to pay the loan back early.

Secured loans are typically spread over a much greater timeframe than unsecured loans, which means that lenders are less likely to come down on you heavily if you default on the odd repayment. However, you shouldn't even consider taking on debt if you aren't confident that you can make the repayments. Repayment terms of up to 25-30 years also mean that it's easier to keep track of your finances, so that you shouldn't get any unpleasant surprises.

With property as security you'll find that lenders are prepared to offer much larger loans. Unsecured borrows (with a good credit history) can expect a maximum of £25,000. On the other hand; loans offered to secured borrowers are calculated according to their property value, which can involve some big sums.

Before taking out a secured loan it is worth talking to an independent financial advisor to get an overview of other borrowing options. You might find that it makes shrewder financial sense to think about re-mortgaging your property, or taking out a home equity loan.

People often mistakenly think that bad credit means that they won't get a loan. However, homeowners with adverse credit histories (as a result of defaulting on credit card repayments or having a County Court Judgement made against them) shouldn't face any problems when applying for a secured loan.

 

 

 

 

 

 

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