Best Secured Loans
The definition of a secured loan is when the
borrower uses their home as collateral to guarantee
that they can repay the loan. This allows the
borrower to take out a much larger sum of money
in the loan; usually a minimum of £20,000
upwards. A secured loan means that if the borrower
fails to pay back the loan, the lender has the
right to take the borrower’s property in
return for paying back the loan. As it's unlikely
that the borrower would deliberately try to not
pay back the loan, a secured loan could mean that
the borrower will be paying less APR.
Secured loans offer all sorts of flexible repayment
terms, so the borrower should make sure that the
small print is read. Clauses that can prove helpful
when taking out a loan include: ‘payment
holidays' whereby the borrower has the power to
halt repayments for an agreed period of time in
order to redistribute funds elsewhere and redemption
charges that are in the borrower’s favour
– eliminating any possibilities of being
hit with penalty fees for trying to pay the loan
back early.
The timeframe for a secured loan is typically
greater than that of an unsecured loan as there
is usually a substantial difference in the amount
loaned out. Therefore, lenders are unlikely to
come down heavily on the borrower if the odd repayment
is not met. However, the borrower shouldn't even
consider taking on debt if he isn’t confident
that the repayments are financially manageable.
With repayment terms of up to 25-30 years it's
easier for the borrower to keep track of his finances,
so that any unpleasant surprises are less likely
to occur.
The borrower who uses their property as collateral
will find the majority of lenders are more prepared
to offer much larger loans. Though, secured borrowers
have this calculated with accordance to the value
of their property which can obviously get confusing.
Unsecured borrowers that have a good credit history
should expect a loan of £25,000 maximum.
We recommend using an independent financial
advisor before taking out a secured loan as it
is worth getting an overview of other borrowing
options. The borrower might find that it makes
wiser financial sense to think about taking out
a home equity loan, or re-mortgaging their property.
For a wider range of loan products we recommend
that you visit our parent site Loans
UK.
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