In the world of personal finance, there are predominantly two types of loan, namely secured loans and unsecured loans. The attention of this article is on secured loans.
A secured loan is where the borrower puts forward an asset, (eg a car or property) as collateral or security for the debt. The debt is therefore secured against the collateral, and should the borrower default on the loan, the lender is entitled to take possession of the asset that was used as collateral, or force its sale in order to recover as much of the debt as possible.
If a home is being used as collateral, the lender will place a 2nd charge on the property. Usually, the mortgage lender has the 1st charge on a property, which means that when the property is sold, the money owing to the mortgage lender is paid back before anyone else, including the owner, gets any money. With a secured loan, the lenders charge normally sits behind the mortgage lenders charge as a 2nd charge. This means that if the house is sold, the secured loan lender only gets his repayment after the 1st charge has been paid off. It is for this reason that when using property as security for a loan, there has to be enough equity in the property to allow the full amount of the loan to be repaid once the mortgage has been repaid.
Because the loan is secured, the risk to the lender is significantly reduced when compared to an unsecured loan. It is because of this, the applicant does not need to have the best credit record which would be the case for an unsecured loan, and as such people who have been refused an unsecured loan may still be eligible for a secured loan. Secured loans can be taken out over longer repayment terms than unsecured loans - up to 25 years, which allows scope for keeping the monthly repayments down, which can be useful when budgeting.
You can also borrow much larger sums than with an unsecured loan, which tend to have a maximum of £25,000. The amount that you can borrow will differ from lender to lender, as will the rate of interest charged. Rate is normally dependent on risk, so the better your credit history, the lower the interest rate that you are likely to get. However, it should be mentioned that the value of your property can also play a part when it comes to determining the interest rate.
So how do you go about sourcing a secured loan? It is not something you can get by popping down to the high street like you can with an unsecured loan. Finding the best homeowner loan to fit your situation can be a complex thing to do as there are several factors that the lender will take into account. The easiest way is to identify a reputable secured loans broker, who has access to all the lenders and their products. Most lenders only make their loans available through brokers. The broker will be familiar with the requirements of each lender and will thus be able to use their expertise to find the best loan to suit your individual requirements from the many loans available, saving you hours of work.
A secured loan is where the borrower puts forward an asset, (eg a car or property) as collateral or security for the debt. The debt is therefore secured against the collateral, and should the borrower default on the loan, the lender is entitled to take possession of the asset that was used as collateral, or force its sale in order to recover as much of the debt as possible.
If a home is being used as collateral, the lender will place a 2nd charge on the property. Usually, the mortgage lender has the 1st charge on a property, which means that when the property is sold, the money owing to the mortgage lender is paid back before anyone else, including the owner, gets any money. With a secured loan, the lenders charge normally sits behind the mortgage lenders charge as a 2nd charge. This means that if the house is sold, the secured loan lender only gets his repayment after the 1st charge has been paid off. It is for this reason that when using property as security for a loan, there has to be enough equity in the property to allow the full amount of the loan to be repaid once the mortgage has been repaid.
Because the loan is secured, the risk to the lender is significantly reduced when compared to an unsecured loan. It is because of this, the applicant does not need to have the best credit record which would be the case for an unsecured loan, and as such people who have been refused an unsecured loan may still be eligible for a secured loan. Secured loans can be taken out over longer repayment terms than unsecured loans - up to 25 years, which allows scope for keeping the monthly repayments down, which can be useful when budgeting.
You can also borrow much larger sums than with an unsecured loan, which tend to have a maximum of £25,000. The amount that you can borrow will differ from lender to lender, as will the rate of interest charged. Rate is normally dependent on risk, so the better your credit history, the lower the interest rate that you are likely to get. However, it should be mentioned that the value of your property can also play a part when it comes to determining the interest rate.
So how do you go about sourcing a secured loan? It is not something you can get by popping down to the high street like you can with an unsecured loan. Finding the best homeowner loan to fit your situation can be a complex thing to do as there are several factors that the lender will take into account. The easiest way is to identify a reputable secured loans broker, who has access to all the lenders and their products. Most lenders only make their loans available through brokers. The broker will be familiar with the requirements of each lender and will thus be able to use their expertise to find the best loan to suit your individual requirements from the many loans available, saving you hours of work.
Steve Smith writes for Secured Loans Arranged a specialist UK secured loans broker visit the site today at http://www.securedloansarranged.co.uk/information/
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