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What is a Secured Loan and what are the risks? (Page 1 of 2)
A Secured Loan is a loan secured on the homeowners property very much in the same way as a Mortgage is. A Mortgage on a property is known as the 1st Charge a Secured Loan therefore becomes the 2nd Charge. If a Secured Loan is never paid then obviously the Homeowners home is at risk. With the Mortgage company having the 1st charge they therefore reclaim their money first. A Secured Loan Lender would then follow as they are the 2nd charge. It is worth remembering that a Mortgage and Secured Loan Company would only ever repossess a property as a last resort.
A Secured Loan is ideal for Homeowners who are looking to raise finance by using their home as security. Traditionally a Secured Loan can provide Homeowners with a lower APR than that of an Unsecured Loan. Obviously a Loan Lenders APR varies depending on the personal circumstances of the applicant. A Secured Loan can be used for a variety of purposes. The most common Secured Loan purposes are for Home Improvements and for Debt Consolidation.
Home Improvement Secured Loan
A loan that is secured on the applicants home address for the purpose of Home Improvements. The loan can be used for a new conservatory, renovations, extension or simply for double glazing. Almost any form of home improvements can be funded by a secured loan. You may find that some secured loan lenders will require proof of what you will be using the funds for. This can be provided by simply gaining a written quote from someone who you are looking to have the work done by. Chances are a Home Improvement Secured Loan will actually increase the value of your property so it will be money well invested.
Debt Consolidation Loan
A loan that is secured on the applicants home address for the purpose of Debt Consolidation. The loan is generally used to consolidate (pay off) all existing credit by putting it into one secured loan and this generally reduces the monthly payments and therefore frees up more of your monthly income to use for more exciting purposes than clearing credit cards, store cards, loans or hire purchases! Sometimes the only way in which the monthly payments can be reduced is by taking the Secured Loan over a longer period than what the existing credit is currently on. This can increase the amount in total that you will pay back but customers who take a Debt Consolidation Loan generally are more interested in the reduced monthly outgoing on credit.
A Secured Loan can be used for other purposes besides Debt Consolidation and Home Improvements. They can also be used for a Car, Holiday or Wedding. Generally Secured Loan lenders do not raise finance for Business. For a Business Loan it may be a better route to contact your local Bank or Building Society. Why would I want a Secured Loan instead of an Unsecured Loan?
There are many reasons why.
Repayment Period A Secured Loan can normally be taken over a longer period than that of an unsecured personal loan. Unsecured Loans can normally only be taken over a maximum of 7 or 10 years. Some Secured Loan Lenders will allow the applicant to take the finance over a 30 year period and most will allow the finance to be spread over 25 years worth of payments. Obviously by taking the loan over a longer period reduces the monthly payment to the applicant although you must remember the longer you take the loan over the more interest you will pay.
Entry Condition Reports
As a wise investor you would be interested in protecting your rights as well those of your tenants. One way of doing that is to make sure all documents related to renting out a property are complete and validated. One of the important requirements of a tenancy agreement is to have the entry condition report filled out. This documents the condition of the property before and after the tenancy period. It is used to prevent any possible disputes between the lessor/agent and the tenant due to damages caused to the property.
An entry condition report is generally prepared by companies hired for property management Gold Coast. This has to be filled out both by the tenant and the lessor/agent when a tenant moves in. An ideal scenario is that the report is completed before the day the tenant occupies the property. In case this is not possible, the lessor/agent can fill their part of the document and hand it over to the tenant. This document is generally given to the tenant along with the tenancy agreement.
The lessor/agent has to indicate it on the form that all items in the property are clean and in working order. The tenant will need to confirm these comments after inspecting the items and then sign the form for approval. In case the tenant is in disagreement with the comments of the lessor/agent, they should specify this in their comments on the form. The entry condition form may also include photos or videos of the property and the items. The tenants are usually given three days to complete the report and return it to the lessor/agent after the tenants are allowed to move in.
An entry condition report is used for making a comparison of the property when the tenant moves in and when a tenant moves out. It has to be signed by both parties in order to make sure that all facts stated on the report are true. The entry condition report is an important document and, therefore, it needs to be kept in a safe place. Generally, this document is kept with the property managers Gold Coast. The report can be used to claim damages if any are found.
To safeguard the rights of lessor/agent and the tenant, entry condition report serves a great purpose. This will lead to fewer misunderstandings and disputes between the lessor/agent and the tenant.