One of the major benefits of such a loan is that the interest rate charged tends to be significantly lower than that of an unsecured personal loan. A lower interest rate, which is calculated as the annual percentage rate (APR), means that more of your monthly repayment is going towards repaying the original loan, rather than being absorbed by the interest you have incurred along the way. Depending on your circumstances, you may want to take advantage of a lower APR by repaying the loan over a shorter period of time, or alternatively by paying back less each month than you would have done with a higher rate of interest.
Another advantage is that lenders generally offer higher levels of credit to home owners. This can be a loan of hundreds of thousands of pounds, depending on the value of your property and the amount of equity that you have built up within it. In addition, applicants who are self-employed or have an adverse credit history will find that they have much more chance of being approved if they have some home equity under their belts.
Typical Example:
"We borrowed £25,000 for just £192.25 a month
PAID OFF all our credit cards
PAID OFF all our store cards
PAID OFF all our other loans
HAD CASH LEFT OVER ... EXCELLENT!"
£5,000 to £50,000+ any purpose over 25 years
One LOW monthly repayment to suit YOUR budget
Payment Protection Insurance for COMPLETE PEACE OF MIND
However, the key drawback of this type of secured loan is that your home is at risk if you default on your repayments. Because of this, it is recommended that you contact the lender immediately if you are having difficulty in keeping up your repayments. You should find that a good lender would rather come to some agreement on reducing the amount you repay each month and increasing the repayment term, rather than taking it as far as court proceedings and potentially the repossession of your home. However, a lender's understanding and good will cannot be guaranteed and cannot therefore be relied upon if you are having financial difficulties. With this in mind it is highly advisable that you only take out a loan that you are confident you can repay on time.
secured loans enable homeowners to borrow capital and offset some of the risk against the value their property. On a practical level this means that anyone taking out a secured loan is effectively using their property to guarantee the loan. Of course if the borrower continually falters with repayments the consequences could be disastrous. On the other hand; secured loans have a number of distinct benefits over other types of borrowing.
Lower risk means that banks and building societies can pass-on some of their savings (made on insurance etc) by offering much better interest rates to property owners. However, attractive Annual Percentage Rates aren't all they have got to offer.
Today secured loans come with all sorts of flexible repayment terms, so its' important to read the small print. Clauses to keep an eye out for include: ‘payment holidays´ whereby you can halt repayments for an agreed period of time in order to divert capital elsewhere (say to help with the costs of a wedding or newborn child) and favourable redemption charges - so you won't be stung if you want to pay the loan back early. Secured loans are typically spread over a much greater timeframe than unsecured loans, which means that lenders are less likely to come down on you heavily if you default on the odd repayment. However, you shouldn't even consider taking on debt if you aren't confident that you can make the repayments. Repayment terms of up to 25-30 years also mean that it's easier to keep track of your finances, so that you shouldn't get any unpleasant surprises.
With property as security you'll find that lenders are prepared to offer much larger loans. Unsecured borrows (with a good credit history) can expect a maximum of £25,000. On the other hand; loans offered to secured borrowers are calculated according to their property value, which can involve some big sums.
People often mistakenly think that bad credit means that they won't get a loan. However, homeowners with adverse credit histories (as a result of defaulting on credit card repayments) shouldn't face any problems when applying for a secured loan. Click here for more information on bad credit loans
To summarize, Secured loans: for homeowners who haven't enough equity on their property to re-mortgage (or don't want to for other reasons) secured loans are a good bet. Because the borrower is able to use their property as security; the overall risk on the loan is reduced. Banks and building societies are therefore able to offer preferential terms and conditions. The list of potential benefits includes: being able to borrow larger sums, more flexible repayment plans (including the option of taking ‘payment holidays´) and most importantly lower interest rates. If you intend to use a secured loan to consolidate a number of other debts it's important to realise that your property is at stake.
SECURED LOANS REPAYMENT TABLE
| LOAN AMOUNT |
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|
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| APR Variable | ||||||||||||
| W | W/O | W | W/O | W | W/O | W | W/O | ||||||||||
| £5,000 | 57.59 | 52.61 | 63.76 | 57.75 | 78.45 | 69.71 | 131.00 | 109.41 | 11.9% | ||||||||
| £7,500 | 86.39 | 78.91 | 95.63 | 86.63 | 117.68 | 104.56 | 196.50 | 164.16 | |||||||||
| £10,000 | 106.54 | 97.91 | 119.41 | 108.76 | 147.33 | 133.33 | 254.54 | 213.52 | 10.7% | ||||||||
| £15,000 | 159.81 | 146.87 | 179.12 | 163.14 | 224.00 | 200.00 | 381.81 | 320.28 | |||||||||
| £20,000 | 213.01 | 195.82 | 238.82 | 217.52 | 298.66 | 266.66 | 509.08 | 427.04 | |||||||||
| £25,000 | 226.43 | 210.48 | 260.95 | 240.18 | 337.85 | 304.48 | - | - | 8.4% | ||||||||
| £30,000 | 271.71 | 252.57 | 313.14 | 288.21 | 405.42 | 365.37 | - | - | |||||||||
| £35,000 | 300.93 | 280.67 | 350.14 | 323.26 | 458.50 | 414.37 | - | - | 7.7% | ||||||||
| £50,000 | 429.90 | 400.95 | 500.20 | 461.80 | 655.00 | 591.95 | - | - | |||||||||
| W | inclusive of payment protection insurance |
| W / O | no cover included |
