A secured loan offers an affordable option

Secured loans have become increasingly popular in the UK over recent years, with many homeowners deciding to make the most of their increasing equity levels by taking out this type of loan.

A secured loan provides a very effective solution when it comes to affordable borrowing, and you will find a wide range of lenders that are able to offer this type of loan.

As with any loan it is important to ensure that you can afford the repayments on your borrowing, and with a secured loan this is even more important, as otherwise you could face severe consequences.

It is very important to give the matter plenty of consideration before you take out a secured loan, as this is a long term, important financial commitment that cannot be taken lightly. There are a number of commonly asked questions relating to secured loans, and some of these include:

What exactly is a secured loan?

A secured loan is a loan that is secured against your property, and therefore this type of loan is only available to homeowners. The loan is usually secured against the equity in your home.

There are many lenders that offer secured loans these days, and this type of loan has become increasingly popular as property prices have rocketed over the past few years.

How much can you borrow with a secured loan?

The borrowing levels offered with secured loans are generally far higher than those offered with unsecured loans. The actual amount that you will be eligible to borrow will depend on a number of factors, and this includes your income and outgoings, your credit rating, and employment status, and your equity levels.

What is equity and how much of your equity can you borrow against?

Your equity can be worked out easily. You simply need to find out the market value of your property and then deduce any outstanding mortgage or secured loan balances. The amount left is the equity in your property, which is the amount that you would receive if you were to sell the property at that time.

Some lenders will enable you to borrow up to a certain percentage of your equity; some will allow you to borrow the full amount of your equity; and some will let you borrow over and above your equity levels. This can vary from lender to lender, so you do need to check to see which lenders offer the most appropriate borrowing levels for your needs.

What sort of repayment periods are offered with secured loans?

The repayment periods offered with secured loans are generally much longer than those offered with unsecured loans. In many cases secured lenders will offer repayments terms of between three and twenty five years, but you may find some lenders that offer even longer repayments periods.

Your age may determine the maximum repayment period that you can get, and the repayment periods available can vary from lender to lender.

What sort of interest rate will be charged?

The typical APR on many secured loans can be quite competitive, but the actual interest rate that you will be charged will depend on a number of factors.

This includes your credit rating and the amount that you borrow. The interest rates charges can vary widely from one lender to another, so it is strongly advisable to take the time to compare and find the most competitive interest rate for your circumstances.

What can secured loans be used for?

A secured loan can be used for pretty much any purpose depending on your needs. This includes consolidation of existing debts, carrying out home improvements, paying for a luxury holiday or car, funding a wedding, paying for an education, or any other purpose.

What are the main benefits of a secured loan?

There are a number of benefits that come with a secured loan. Increased borrowing power means that you have a better chance of raising the money that you need. Longer repayment periods mean that you can spread the loan over a longer term, thus keeping your repayments down.

Also, secured loans are often available to people with bad credit because of their secured nature, which means that even those that cannot get unsecured credit because of their poor credit rating may still be eligible for a secured loan.

Are there any risks involved with secured loans?

Yes, and it is important to take these into consideration before you make any commitment. The major risk that has to be considered with this type of loan is that it is secured against your home, which means that if you default on your repayments you could risk losing your home.

It is therefore imperative that you ensure that you can afford this type of loan before you make any commitment otherwise you could find yourself without a roof over your head. Another risk that you need to consider is that if you are borrowing against the equity in your home you could find yourself tied into negative equity in the event that house prices then fall, and you could owe more on your property than the property is actually worth.

Source:http://www.thriftyscot.co.uk/money/112007/a-secured-loan-offers-an-affordable-option.html