Home | Ask Your Question | Mortgage Glossary
Find me a lender for:  
All About Secured Loans By Michael Stepney

A secured loan is a loan agreement in which the borrower pledges property as surety for the loan; hence they are also known as homeowner loans. If the borrower continually defaults on loan repayments, the lender may take action to reclaim the debt including selling the property.

Advantages and disadvantages

With something as valuable as your property at stake; lenders know that you are likely to stick to the agreement. Add in the extra financial security provided by your property and its easy to see why lenders regard you as low risk. As a result you can expect interest rates one or two points lower than with an unsecured loan, you can borrow greater amounts; anything up to 125% of the equity in your property, and you can spread the loan over a longer term.

The main disadvantage of a secured loan is the attendant risk of losing your property. You need to be absolutely sure that you understand the terms and conditions of the agreement and that you can meet loan repayments. If you find yourself in financial trouble most lenders will be sympathetic and do everything that they can to help reschedule repayments. After all, the last thing they want is to face a lengthy court case incurring hefty legal fees. However, its important to understand that your property is at risk.

Should I take out a secured loan?

Before you take out a secured loan, think carefully about what you need it for. Secured loans can make astute financial sense in the right circumstances, for example: if you want to consolidate a number of smaller expensive debts, such as credit cards, into a single monthly payment. However, if you intend to use the loan for purchase, such as a new car or holiday, it would be wiser to start saving.

There is a convincing argument for arranging a secured loan to pay for home improvements; as this will add value to your property. However, any pay-back will be in the long-term and depends on the buoyancy of the property market.

Finding the best deals

Everybody knows that there are great loan deals available on the Internet; the difficulty lies in finding them. Unfortunately there are no real short cuts and the key is to do as much homework as possible first.

Start by getting in touch with a number of brokers (make sure they are FISA registered) and see what they can offer you. Larger brokerages can be motivated by hitting sales targets and you may find that they try to push a particular lender.

FISA regulations stipulate that lenders may not initiate contact for seven days after sending the initial loan agreement. This cooling off period is to allow potential borrowers to consider their options. Use it carefully to compare brokers. Remember that you are under no obligation until you have signed the loan agreement.

Dont be fooled by unrealistic loan offers made over the phone. Unscrupulous lenders often promise unrealistic rates in the hope of getting their hands on your pay slips. Once they have your documentation; loan conditions are often then revised. If this happens to you; go elsewhere.

If you are still having difficulty finding a suitable loan; consider approaching and Independent Financial Advisor.


Michael Stepney is part of the team at First Aid Finance; one of the UKs leading secured loans brokers. For more advice or a secured loan quotation visit their website at First Aid Finance.




See Also:

Payday loan: A Complete overview
From different surveys, it is seen that the number of customers taking payday loan as well as payday lending companies are increasing frequently. If you are a person taking the payday loan for the first time or want to gather information regarding payday loan, then this article will be of great ... more...

What is a Personal Secured Loan?
A personal secured loan is the generic term for a loan. In simple terms a personal secured loan gives security to the lender on the loan other than a simple promise to repay the loan.This type of loan is essentially an amount that is secured against property put up by you as collateral. Since this ... more...

Mortgage Loan Basics: Interest Only Loans, Pay Option ARM
Mortgage Loan BasicsTo understand loans and mortgages we need to understand loan limits first. If your loan amount exceeds the amount below, you will qualify for a Jumbo Loan, which carries higher interest rate.One-Family (single family homes) $417,000 Two-Family(duplex) $533,850 Three-Family ... more...

Get the Facts Before You Borrow: Payday Loan 101
In the current economic climate, alternative means of obtaining money to make ends meet are becoming increasingly necessary. Some alternatives include borrowing money from friends/relatives; cash advances from employers; pawning personal effects and payday loans. Also known as a check/cash ... more...


More on loan...

Search More Info On:

  • Property
  • Find Loan
  • Find Lender
  • Loan Term
  • Purchase Agreement
  • Property Value
  •  

    Shop For Your Mortgage Now!
    Shop For Your Mortgage Now!

    You'll be re-directed to Top-Lenders.com

    Want to Know Your Rate?
    Get Customized Mortgage Quote Instantly

     
    ExplainingMortgages © 2005 - 2009