What is a Secured Loan, and How Can It Assist Me?
A secured loan is one in which you use your property as collateral against the money you borrow – using the asset value of your house to show that you are not a high risk, making it more secure for the lender. This means that interest rates are typically lower than those for an unsecured loan, and you should face fewer obstacles in obtaining the loan that will help you expand your business or buy a home.
Taking out a secured loan against your home, on the other hand, is always a risky proposition because if you fail to make the repayments, your property may be repossessed.
Most personal loans from a bank or a building society are not secured in this way, but it is becoming more common for people in financial trouble to use a secured loan to help them get back on track.
Why Would You Choose a Secured Loan Over an Unsecured Loan?
- They are less difficult to obtain. Unsecured loans are typically less expensive, but those with poor credit will typically have their loan application denied. Secured loans allow lenders to consider those with poor credit because they know they will get their money back one way or another.
- You are welcome to borrow more. An unsecured loan allows you to borrow up to £30,000, while secured loans allow you to borrow up to £75,000.
- The debt is spread out over a longer period of time. Because of the larger sums of money involved and the significant set-up costs, secured lenders prefer that the loan be repaid over a longer period of time, typically 5 to 20 years. Of course, borrowing for a longer period increases interest payments, but it also lowers monthly payments.
Secured Loans for Home Improvements
If you want to improve your home with an extension, conservatory, or general repairs and improvements, a secured loan can be a great way to get started. Due to low interest rates in recent years, many borrowers have chosen to keep their current low rate and borrow using a secured loan rather than remortgage.
Secured Loans for Debt Consolidation
Consolidating a group of debts into a single, more manageable payment can be cost effective for many people. However, great care must be taken to ensure that this is the correct course of action. Debts such as credit cards, personal loans, store cards, and others are short-term debts, and if you consolidate them with a secured loan, the term will lengthen, potentially increasing the amount of interest you pay.
Bad Credit Secured Loans
Because of the large number of lenders in the secured loan market, even if you have bad credit, you may be able to obtain a loan. We may be able to assist you with defaults, CCIs, or bankruptcy. If the rest of your application is of high quality, and you have enough equity in your home, you have a good chance of being approved.
Secured Loan Rates
Secured loans can have competitive interest rates because the lender has security over your property. As a result, lenders will consider a variety of factors when determining the interest rate you will pay, such as:
- Your age
- Your income and expenditure
- How much equity you have in your property
- Your credit situation
- The condition of your property
Secured Loan Lenders
There are now numerous lenders who offer secured loans in a wide range of situations. Your dedicated loan broker will be able to advise you on the best lender for your specific circumstances.