What
is a secured loan?
A secured loan is one where the borrower guarantees repayment
of the loan by the securing of collateral (usually the
borrower’s home or property, which is at risk if
loan repayments secured upon it are not made). A secured
loan can thus be used for just about any purpose, making
that new car, dream holiday or home improvements more
affordable. Some lenders may also issue secured start-up
loans for small businesses; collateral will also usually
be required in this case, for both short term and long
term loans. A secured loan is generally a more popular
choice than an unsecured loan because the interest rate
is often lower.
How much money will I
be allowed to borrow?
The amount of money that can be borrowed
through a secured loan will be limited by the collateral
value; the more valuable the collateral, the larger
the amount of loan money that may be secured on it.
The lender will also base their loan amount on their
view of your ability to repay the loan, which depends
on the customer’s financial status.
Other specialist loans
available
The money borrowed in a secured loan
is usually repaid in monthly installments for a period
of time anywhere from 3 to 25 years, depending on the
amount of money borrowed.
What about interest?
The amount borrowed will be subject
to an interest charge; quoted as percentage, this value
is referred to as the Annual Percentage Rate (A.P.R.).
The A.P.R. can either be fixed or variable. A fixed
A.P.R. means that the interest rate on the loan remains
constant throughout the repayment period, whereas a
variable A.P.R. features an interest rate that changes
with market climes and could ultimately affect the total
amount of money that is to be repaid. A lender will
usually advertise a variable A.P.R. value as a “typical”
amount, meaning that this value is the interest rate
that applies to at least 50% of that lender’s
customers. As stated earlier, secured loans generally
feature lower interest rates than unsecured loans, as
the lender has secured collateral on the loan money
in the form of the customer’s property.
What does the application
process for secured loans involve?
The application process for a secured
loan need not be very complicated. Preliminary applications
can be made in person, over the telephone, or even on
the internet. The lender will consider several factors
when assessing an initial application; the applicant’s
income and various financial commitments to determine
their ability to repay the loan, and also the applicant’s
past credit history, taking into consideration any negativity
such as mortgage arrears, defaults or county court judgments.
Credit scoring facilities and credit reference agencies
are commonly used by lenders to carry out these assessments.
Othe Useful Sites
Secured Loans
UK : Offer a range of secured loans from different
companies.
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