Secured personal loans
If you are a homeowner, it couldn't be easier to
apply for a secured personal loan.
Secured personal loans - those where your home is used as
security against the personal loan - are suitable for those looking to raise a large sum
of money or who have had difficulty in arranging an unsecured loan because of
credit problems or other such issues. (Lenders are more flexible with their
underwriting, making a secured personal loan possible when you may have been turned down
for an unsecured loan).
By having the security in place, covering the
loaned amount, the risks to the lender of non-payment is far lower when compared
to personal loans that are unsecured. This means that the costs involved for the
second lender
are reduced, as the lower risk exposure reduces the amount of underwriting
needed and influences other such factors.
As the lenders face lower costs when dealing with
secured personal loans, they are able to pass on these lesser costs on to you the
loan customer in terms of reduced interest rate charges which means that secured
personal loans are generally cheaper than their unsecured counterparts. This is an
important factor when looking to borrow large sums of money, as the higher the
amount the greater the influence the APR has, so even a small reduction in this
can mean a large difference in the overall cost of the secured loan.
There are many reasons why someone may require a
secured personal loan, and such a loan can be used for any purpose. Because of their
suitability for borrowing high amounts, they are commonly used to provide the
money needed for major home improvements such as an extension, loft conversion
or fitting of a new kitchen – all things that should add value to the home.
The cost of your loan will be determined by two
factors, one being the APR (annual percentage rate) charged on it, this is a
percentage figure that represents the total cost of the loan, and includes all
the costs such as the interest charged, arrangement fees and any other costs
relating to the administration of the loan (although it will exclude any
penalties or early-repayment fees as these only apply in certain cases). The
length of your loan repayment period also influences its cost, the longer this
is the more interest you will be paying (for a given APR) so it is beneficial to
aim to get a balance between a low APR and a short repayment term.
Secured personal loans are worth considering if you need
extra money to spend on a new car, home improvements, or that holiday of a
lifetime.
Benefits of secured personal loans include
- lower monthly repayments than unsecured loans
and the ability to borrow more money over a longer period of time.
- Some lenders will offer flexible repayment
terms allowing you to take payment holidays or pay the loan off early without
penalty.
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