Guide To Secured Loans

May 14, 2012

In the current harsh economic climate, obtaining credit can be difficult as banks are much more cautious than they used to be. If you are looking to borrow money, it’s a good idea to research loans online at MoneySupermarket where you can compare secured and unsecured loans. Here is a look at the pros and cons of secured loans.

Overview

Essentially, a secured loan is one which the lender can secure against your property. This may be anything of any real value, although more often than not it is a car or, for larger loans, your home. Once the terms are in place the lender then has the right to take the property on which you secured the loan should you fail to make the repayments. The lender can then sell the property in order to get their money back.

Types of Secured Loan

There are basically five types of secured loans: a Homeowner Loan; a Title Loan; a Secured Car Loan; a Pawn Shop Loan and a Consolidation Loan.

A Homeowner Loan is generally taken out by individuals who are unable to get any other type, usually because of a bad credit score. The amount of equity (the value of the property less the outstanding mortgage) the homeowner has in the property determines how much money can be borrowed. In some cases, lenders will offer a larger loan (up to 125% of equity), although the interest rate will be much higher.

A Title Loan means that the lender will hold a ‘lien’ against your property, whether it is a car or house. In other words, they will remain the legal owner of the property until the loan has been repaid. Should repayments not be met, the lender can repossess the property for resale.

A secured Car Loan applies to transactions in which an individual receives a loan in order to purchase a car. The person in this case will not be able to sell the car until the loan is paid off.

A Pawn Shop Loan allows someone to secure a loan on any asset of sufficient value, such as jewellery or a TV. The value of the item, however, will be set much lower than its real value and this will be the amount of money you can receive. Once the loan is repaid, provided this is within the agreed period, the property will be returned.

Finally, a Consolidation Loan enables an individual with a number of debts to put them together into one single loan. The main advantage of this is that the interest rate of the new loan will, more often than not, be lower than that of the other debts.

Advantages of a Secured Loan

The main advantage of a secured loan is that people will be able to borrow considerably more money than they could with an unsecured loan. In addition, the payback period for a secured loan is generally much longer than for an unsecured one. A secured loan is also easier to obtain, even with a bad credit history.

Drawbacks

However, the interest rate on a secured loan is likely to be variable, meaning it can go much higher. In addition, while many believe a secured loan is safer, there is actually a greater risk involved as there is always the possibility that you will end up losing your home. Many, therefore, conclude that taking out a secured loan should only be done when there is no other alternative.

  • Secured Loans For Homeowners
  • UK loan products fall into two categories: unsecured loans and secured loans. Secured loans are secured on your property which provides security for the lender and some benefits for the borrower. In order to qualify
  • Secured or unsecured – which is the best loan option?
  • When it comes to getting a loan there are a number of different options available to consumers, and the main two categories that are available are secured and unsecured loans. These loans are suited to
  • Make sure you keep up with repayments on your secured loan
  • In the past many people were nervous about taking out a secured loan, as the very fact that the loan was secured against the home made some people extremely wary. However, for those with damaged
  • Personal Loans - Secured and Unsecured Loans
  • There are personal loans available these days for all sorts of purposes, and these loans are all either secured or unsecured. There are many people that will be eligible for either a secured or unsecured
  • Is it wise to borrow against your equity?
  • Over the past decade many people have taken out secured loans, which are loans that were secured against the equity in their homes. Over the latter part of the 1990s for the next decade property

Comments

Got something to say?