A guide to Loans

ALL YOU NEED TO KNOW ABOUT SECURED LOANS

A secured loan is any loan that is taken out against the value of some specific item of value, meaning that any failure to repay the loan can result in the confiscation and sale of the item to cover the debt.

There are various different types of secured loan, however, the most common by far is a homeowner loan.

These loans usually come with a lower rate than unsecured loans and they are generally much easier to obtain. This is because of the added security, which insulates the lender from any inability on the borrower to repay the loan.

HOW MUCH CAN I BORROW ON A SECURED LOAN?

The amount varies between £3,000 and £50,000 although, depending on your circumstances, some lenders might go as high as £100,000.

For a homeowner loan, the amount is limited by the ‘surplus equity' – the property value minus the primary mortgage, but some lenders will advance loans of up to 125% of the surplus equity at a higher rate.

HOW MUCH WILL A SECURED LOAN COST?

Lenders charge an interest rate on any loan you take out, this is the Annual Percentage Rate (APR). The loan's amount, term and APR are determined by the equity in your home.

A secured loan, unlike an unsecured one, will most likely have a variable rate which is usually attached close to the base rate.

WHY SHOULD I TAKE OUT A SECURED LOAN?

There are many reasons for taking out a secured loan from debt consolidation to freeing up money for home improvements, which especially makes sense as you are adding to the value of the house.

As explained earlier, a secured loan is easier to obtain than an unsecured one. This makes it an appealing option if you are self-employed, have recently changed jobs, have an adverse credit history or any other circumstances that would decrease your chances of taking out a personal loan.

Secured loans also offer a level of flexibility that unsecured loans cannot. With an unsecured loan you can borrow, at most, £25,000 but with a secured loan you can borrow as much as £100,000. The term on a secured loan is much longer than an unsecured one, from 3 to 25 years as opposed to 6 months to 7 years.

HOW DO I GO ABOUT TAKING OUT A SECURED LOAN?

First fill out the forms on this website to compare many rates and deals out there to find the one that best suits you. Once that has been done and you have decided on the best deal, you will have to sign a credit agreement. Read it carefully before signing it as the terms are legally binding. You will also be required to submit a number of documents: proof of your age, proof of residence, proof of ownership and proof of income.

If you are married you will be required to get your partners consent before any deal is completed after which the lender will look into your credit history and inform you on the terms and conditions of the loan.

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