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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.
Personal Loans (Page 1 of 2)
Personal loans provide the consumer with the credit needed for certain expenses. The consumer loan is unsecured, requiring no assets to be used as collateral. The bank or the lending institution grants it based on your monthly income, also taking into consideration the integrity of the consumer and his/her ability to pay back the money borrowed.
If you have too much credit card debt, then perhaps you might consider taking a personal loan in order to escape the impeding financial obligations. At the same time, you have to keep in mind that this loan can be used for numerous purposes. Some people go the bank and ask to borrow because they do not have the necessary funds to travel. Others want to purchase various things, such as large appliances, pay for treatments or other medical expenses, or buy luxury items such as jewelry. There is a long list of reasons to borrow money, including getting rid of current debt, meeting the payments for another loan, or paying for college.
When deciding to take on an individual line of credit, it is important that you keep yourself informed. Often times, people decide they are interested in a taking out a personal loan on the spur of the moment. Making hasty decisions can lead to problems and debt in the future. Try to think about all other possibilities, the other types of money lending that is available and then make a final decision. Perhaps you want to refurbish your home and purchase some new furniture. Maybe you are getting married and you want the wedding of your dreams. Personal loans can be used for all those reasons and even more. Whether we are talking about getting a college degree or visiting Rome, an individual line of credit can be extremely advantageous. It does not imply using assets as collateral or a guarantor.
What is the single most important factor when it comes to taking on this type of loan? You will be surprised that the money can be granted according to your income alone. However, you might want to further discuss these and other details, with the lender such as your employment profile and information regarding existing loans. If you want a personal loan to get rid of your credit card debt, then you should know that these loans have a lower interest rate.
Regardless if you work for a salary or you are self-employed, an individual loan can be a good choice for many. Some of the lending options are available for people working in certain positions or jobs, such as doctors or engineers. The payment options are considered to extremely appealing, with the duration ranging somewhere from 1 to 5 years. The procedure is far from being complicated and most loans are approved in a couple of days. The paperwork amount is reduced, the bank verifying only your income statement. The thing you want to do is find a reputable lending institution and talk about your possibilities. You can even try to negotiate for a better interest rate. Apart from the income statement, you will probably be asked to provide the following documents: proof of residence, driver’s license or other picture ID, and bank statements.