A Secured Loan Could Save You Money
by Bwalya Mwaba
Published on this site: June 10th, 2005 - See
more articles from this month...
What is a Secured Loan?
A secured loan is any loan that is secured on your home or property.
It is any loan which requires you to provide the lender with some
form of security other than just a promise to pay. The security
will be your property or home. The property may be mortgaged or
owned outright.
If you agree to a secured loan on your home, you should remember
that, although the property remains in your possession, it can be
repossessed by the lender if the loan and the interest are not paid
according to the agreed terms. The lender will then sell the property
in order to recover the money you borrowed plus any additional costs
incurred in recovering the money.
Secured Loan Benefits
In many instances secured loans can be repaid over a longer
period with a lower monthly repayment. The interest rate will
be lower on a secured loan than on a comparable unsecured
loan. A secured loan may also offer more flexible repayment
periods.
- If you're a homeowner, you may get a lower rate through a secured
loan using your property as security. By taking out a secured
loan, you are agreeing to allow the forced sale foreclosure or
repossession) of the asset in order to pay back the loan. The
risk to the lender is reduced so the interest rate offered is
lower. This is why secured loans tend to be cheaper than unsecured
loans and other forms of borrowing. The lender has the added benefit
of security, which provides protection in the event of your inability
to repay.
- Secured loans are more easily accessible to those with a poor
credit record. This means that persons who are self-employed,
or who have recently changed jobs, or who have adverse credit
(ccjs, arrears, defaults, etc.) can take out a secured loan.
- You can borrow larger amounts and repay over a longer period.
The amount available usually ranges from £3,000 to £50,000,
although some lenders will consider lending more. Compare this
to unsecured loans where you're only allowed to borrow up to £25,000.
If you wish to borrow a larger amount or if you require a longer
period in which to repay the loan, secured loans may be the most
suitable for you.
- You can consolidate more expensive borrowings into a single
much cheaper monthly payment. You may choose to take out a secured
loan in order to consolidate debts and replace high-interest loans
with a low-rate loan. The loans being consolidated may include
higher purchase loans, unsecured loans and credit cards.
Useful Points to Remember
Before you take out a secured loan, make sure that you can
afford the monthly repayments. Also, read the loan agreement
carefully and pay particular attention to the rate of interest
required, the term of the loan, the repayments required and
the total amount payable. If you fail to repay the loan, the
lender may repossess your property or home and sell it to
repay the loan. If you borrow money using a mortgage as security
you are agreeing that the lender can claim the mortgaged property
if you fail to keep to the agreement. Your home is at risk
if you do not keep up repayments on a mortgage or other loan
secured on it. You can read some more articles about secured
loans at: http://www.commercial-mortgage-guide.org.uk/loanguide/
Bwalya Mwaba writes for the The Commercial Mortgage Guide.
Visit our website for mortgage related news, articles, tools and
more: http://www.commercial-mortgage-guide.org.uk/.
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