| It is important to remember that there are both pros and cons that you need to consider when it comes to secured loans, and as long as you do your research, familiarise yourself with both the benefits and the risks, and are confident that you can keep up the repayments on your secured loan you should experience no problems and can enjoy a more affordable way of borrowing the money that you need.
You can use your secured loan for almost any purpose. Some of the most popular reasons that homeowners take out secured finance include home improvements, consolidation of their debts, purchase a newer car, pay school fees, a dream wedding, or exotic holiday.
Enjoy greater borrowing power: Secured loans are loans that are secured against the home, and most lenders will base the amount that homeowners can borrow on their equity levels. The borrowing potential is far higher with secured loans than with unsecured loans, although the amount that you will actually be able to borrow will depend on a number of factors, including the value of your home, your equity levels, your financial status, and the lender’s own criteria.
However, with unsecured finance you will normally find that the maximum amount that you can borrow is around £25,000 subject to status, whereas with a secured loan the maximum amount that you can borrow could be far higher than this, which is ideal if you need to borrow more money to find something expensive such as home improvements.
Lower monthly repayments: In the current financial climate we all need to try and keep our monthly outgoings down, and when you opt for a secured loan you can enjoy longer repayment periods that allow you to do just that.
The maximum repayment periods with unsecured loans are usually five, seven, or sometimes ten years depending on the lender. However, with secured loans you can enjoy far longer repayment periods, and this can help to keep your outgoings down because you can spread your borrowing over a far longer timescale.
Easier access to finance: Getting unsecured finance these days can prove quite difficult due to tighter lending conditions, and lenders are far more wary of granting loans that have no collateral attached to them due to fears over bad debts. However, with secured loans the lender knows that there is collateral involved in the form of the property, and this makes secured loans a safer bet for the lender.
Some people may find that they cannot get unsecured finance at all due to their circumstances, such as those with damaged credit. However, even those with damaged credit can often get access to secured loans providing they meet the lender’s criteria.
Competitive rates of interest: Recent reports have suggested that the interest rates charged on unsecured personal loans has been rising, despite the recent Bank of England base rate cuts that were applied in December and in February.
However, you can still get some very competitive deals with secured loans, and with a choice of lenders offering secured finance you can find an interest rate that suits you and fits in with your needs and circumstances. The higher the amount you borrow the lower the interest rate is likely to be, but do bear in mind that those with bad credit will still get charged a higher rate of interest than those with good credit.
The risks: As pointed out earlier, it is also important that you consider the risks before you commit to a secured loan. The secured nature of these loans means that if you do not keep up with repayments your home could be at risk, so you need to make sure that you can afford the monthly repayments comfortably before you go ahead with the loan.
Also, remember that many experts are predicting that house prices could fall, and if you secure a loan against your home you could find yourself falling into negative equity whereby your home is worth less than the amount that you owe on it.
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