Tag Archives: secured loan
The 411 on Secured Loans: What you need to know
Any time someone borrows money from a bank, the funds lent are referred to as a loan. Any time when the bank asks for collateral (a security that the bank takes charge of if you are unable to pay, like your home or property), thats called a secure loan. A first secured loan on property is considered to be first charge, while a second loan (perhaps a home equity or second mortgage) is second charge. Secured loans are easier to obtain than an unsecured loan, as the bank has a means of repayment in the event that you are unable to.
There are many types of secured loan programs available, offering different benefits and such to the borrower. But no matter which one you choose, there are some things you need to know before you agree to or sign anything.
First, secured loans come in a variety of amounts (typically averaging between £3,000 to £50,000, but have been seen as high as £250,000 with some lenders). They are repaid on a monthly basis for a predetermined amount of time (usually between 3 and 25 years). Some loan programs may have a prepayment penalty (a fee attached to the loan if it is paid off earlier than expected), so be sure to ask your lender if this applies to your loan.
Second, the APR (Annual Percentage Rate) is the interest youll be charged for borrowing the money. Your APR will depend on several factors, including your credit history and equity available in the property. Its a wise idea to compare interest rates from different lenders to be sure that youre getting the best one possible.
Next, you need to know how to apply for a secured loan. The Internet revolution has changed the lending industry for the better, as its no longer necessary for you to leave your home to apply for a secure loan. Although you can visit your local branch of your favorite lending institution, its much easier to login online and enter your information, or to pick up the telephone.
Finally, you need to know how governing laws are protecting you. All secured homeowner loans are subject to the Consumer Credit Act of 1974. This act contains strict guidelines as to how money is lent out, covering loans up to £25,000. (Loans for greater amounts are unregulated). Before such a secured loan is granted, you will have to sign a legally binding credit agreement for the terms of your particular program. A consideration period of 7 days is to be granted to you by the lender. Lenders are to offer you insurance options to cover your monthly loan payments in the event that you are unable to pay under specific circumstances, such as illness, unemployment, an accident or death. All coverage options will vary between lenders, and so will the cost, so be sure to check with your lender for any details, specifically as to what is covered and what is not.
Homeowner Loans – Are They Different From Secured Loans?
Let’s face it, getting a loan can sometimes seem traumatic. Where do you go to get a loan? How much can I borrow? What sort of loan is best for me? …and i’m guessing that these are only some of the questions you’ve asked yourself recently, right?
If you’re a homeowner, it’s even worse in some respects because there’s a much wider choice available to you and yes, it includes homeowner loans and secured loans.
So, what’s the difference?
Well, the truth is – “not a lot”! There are many providers out there, lenders and brokers, that use either one or the other term, but in reality, they mean the same thing. So, if you’re looking for a loan and intend to use some of the equity you’ve built up in your property, then a homeowner secured loan could be for you. (Sorry – that means the same as homeowner loan and secured loan as well! Getting a little carried away with the choice thing there for a minute!)
If you don’t have a mortgage, ie you own your home outright, then you cannot opt for a secured loan. This is because in the loans industry, the correct technical term for a secured loan is a 2nd charge loan; so called because a mortgage is a first charge. If you defaulted on your mortgage, the mortgage lender would be able to foreclose on their loan and receive proceeds from the forced sale of your property, equal to the amount they are owed, before a 2nd charge or secured loan lender was able to claim their share of the proceeds to cover their loan to you. So, you can’t have a 2nd charge on your property if a 1st charge doesn’t exist.
Similarly, if you rent your home, ie you’re a tenant, you cannot apply for a homeowner or secured loan because you do not own the property. You will have to go for a personal loan or an unsecured loan (by another name). Confusing isn’t it?
What can I use a homeowner loan for?
The most common purpose for a homeowner loan is debt consolidation (converting lots of existing credit into one secured loan). This happens at any time of the year but is especially common just after Christmas and the summer holidays, when many people have decided that they can reduce their interest payments on credit cards by opting for a homeowner loan.
The next most popular reason is home improvements. If you’re having the builders in or even doing it yourself, you could use the bricks and mortar you already have to help you to raise the cash necessary to cover the costs of the changes you want to make.
..and other common reasons for taking out a homeowner loan are:-
– a luxurious, far off holiday – a new car, caravan or motorbike – a wonderful wedding to remember, – or just to treat yourself to something special.
So what are you waiting for? Go on, pamper yourself! A homeowner loan is easier to apply for now than ever. It’ll only take a few seconds to enquire with an online loan broker and you could have a decision in principle back to you within minutes. Of course, you’ll still need to complete and sign a credit agreement and make sure that you allow enough time for the loan to complete which is typically around 4-6 weeks. Happy hunting!