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By Aldrich Chappel
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As the name suggests, a secured loan is a loan
given to the borrower on a condition that he provides the lender
with something as a security to the loan amount. Generally, the
security offered is the borrower’s home. The property pledged
as the security is called collateral. Secured loans are not risky for the lenders since
they have something from which they can recover their loan amount,
if the borrower fails to repay. For this reason, secured loans
are offered at lower interest rates than the unsecured ones.
Secured loans are easier to get because of the
collateral offered. The ability to offer collateral makes the
secured loan accessible to a whole lot of persons. People who
are otherwise unable to prove their creditworthiness can get a
secured loan if they have something to offer as collateral for
the loan.
Secured loans can be taken for a wide variety of purposes; in
fact, any type of financial need can be fulfilled via a secured
loan. Debt consolidation is one of the most popular reasons why
people take a secured loan.
Depending on the value of collateral offered the loan amount can
range from £3,000 to £50,000. The lenders are not
hesitant to offer a higher amount. If they are satisfied that
the collateral is of a sufficiently high value, they can even
consider lending £100,000 or more.
The repayment options available with secured loans vary with lenders.
Generally, they are based on agreement between the borrower and
the lender. Repayment period might range between three years to
twenty five years. A prepayment penalty may be charged if you
repay the loan earlier than the agreed period.
The process of getting a secured loan has many costs associated
with it. Since, collateral is under question, the lender has to
satisfy himself whether the value of collateral is sufficiently
high or not. If the collateral is your home then he might have
to get your property valued and this will incur some valuation
charges. Solicitor’s fees to prepare the legal agreement,
the conveyance to the property site and office charges are also
included in the cost of getting a secured loan.
The process of applying for secured loans is quite easy. Nowadays,
many lenders are having their own websites. A borrower can submit
an online application for such a loan request. He can also submit
his application over a phone or into any of their offices.
The process of getting approval for a secured loan is a little
longer than the unsecured ones. The cause of the delay is the
valuation of the property or collateral. The paperwork that has
to be done in pledging the collateral also takes time. Lenders
will also take the help of credit rating agencies to get a clear
picture of your credit history. All these formalities will be
completed within few weeks and you can hear about you loan within
30 days of applying.
Every lending
institution has a legal obligation to inform you
about the interest they will charge on your loan. The APR (Annual
Percentage Rate) is the most suitable indicator of this factor.
The APR charged from you will depend upon your creditworthiness
and equity in the property. The borrower should try to get the
loan with lowest APR since it will help him pay the loan easily.
Taking a loan is a legal process and brings financial liability
to the borrower. While taking a loan, a credit agreement has to
be signed; the terms and condition of which are binding on both
the borrower and the lender. This fact itself should encourage
the borrower to get into the minutest details of the loan agreement
and get everything clear before signing on the dotted line.
Summary
Secured loans are offered against collateral. These loans are
less risky for the lender so, they come with lower interest rates
and easy repayment options. The borrower has to pledge his house
or any other asset as the collateral. Secured loans can provide
for huge amounts depending upon the value of collateral. Hence,
they are suitable to finance big needs.
Aldrich Chappel holds a master degree in finance and associated with Get Secured Loans, since its inception. To Find Secured loans visit http://www.get-secured-loans.co.UK
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