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Secured loans are typically a prudent way of borrowing money in order to purchase a valuable asset such as a home or a car.
That being said, they can definitely be risky if you don’t have your finances in order.
Today, I’ll be discussing what secured loans are and what your approach should be if you’re considering getting one for yourself.
Secured loans are loans that are “secured” against a valuable asset of yours. This asset is offered up by you as “collateral”.
This means that if you start failing to make your repayments towards the loan, then the lender has the right to seize whatever asset you put up as collateral and sell it off in order to get his/her money back.
They are typically used to borrow relatively larger sums of money. Secured loans are typically used to borrow amounts upward of £10,000.
Although you can borrow smaller sums of money through secured loans as well. Typically, secured loans start from £3,000.
They typically have lower interest rates than unsecured loans since they are less “risky” for lenders.
That being said, they are much riskier for you as a debtor. Thus, you must thoroughly assess your financial situation before you enter into any secured loan agreement.
There are a number of different examples such as home equity or homeowner loans, second charge mortgages, first charge mortgages as well as debt consolidation loans (although unsecured debt consolidation loans also exist).
A mortgage loan is the prime example of a secured loan. The home you buy as a result of this loan is what you put up as collateral.
Down the line, if you start failing to make repayments towards your mortgage loan, then your home could be repossessed by the lender and sold off.
Here are some things you should definitely be aware of when you’re in the market for a secured loan:
Ensure that any lender you are opting for is authorised and regulated by the Financial Conduct Authority. The FCA has guidelines that lenders need to abide by which protect you from being mistreated. If you feel that you’re being mistreated by your lender at any point, you can report them to the FCA.
If you’re unhappy with your loan or feel like you’re being treated in an unfair manner, then the first thing you should do is file a complaint with the loan company.
If this does not result in your problems being fixed, then you can opt to complain to the Financial Ombudsman Service.
As I mentioned earlier, you can also report them to the FCA. Although the FCA does not take up individual cases, your report could result in them taking action against the lender such as revoking their licence or fining them.
Yes. Secured loans are available to all individuals that have a good credit rating, are able to give proof of their income and can assure the lender that they will be able to afford the loan repayments.
You may have to provide additional documents to the lender if you’re self-employed such as a copy of your SA302 calculations.
If you have a bad credit rating and you’re self-employed, then a secured loan may be more difficult to find.
However, it’s not impossible. As long as you can prove that you’ll be able to afford the loan repayments comfortably, you shouldn’t have too much trouble finding a secured loan for yourself.
That being said, you may find that the loans that are available to you may have much higher interest rates and lower sums of money that you can borrow.
For more information on getting approved for secured loans if you’re self-employed, click here.
While this may seem like an unwise strategy to someone who’s inexperienced, it’s actually a technique that many landlords use to buy new properties.
You can opt to get a second charge mortgage on your current home to buy another property or you can also release equity from it in order to fund your second property.
It’s important when you’re considering this to think carefully about what value your second property will provide to you.
If you’re simply using it as a holiday/second home, then you must ensure that you will be able to afford the mortgage repayments.
Remember that a secured loan would mean that your house could be repossessed if you fail to keep up payments.
There are many different types of mortgages available today that offer an increased range of flexibility when it comes to your payments. For more information on borrowing money against your house to buy another property, click here.
It’s typically not a good idea to take out a personal loan to buy a house.
You may find that you may not even be able to find a lender who provides a personal loan large enough for you to fund the purchase of your home.
However, there are some unique cases in which opting for a personal loan to buy your home could be an option.
These are cases in which your home or apartment is extremely tiny. It can also be if you’re opting to buy a mobile home.
You may find that in these cases, you may be turned down by typical mortgage lenders. Due to this, you may have to turn to lenders who provide personal loans.
Please note that personal loans typically last for a much shorter duration and you’ll also find that any personal loan you opt for will have a much higher interest rate.
For more information on personal/cheaper loans to buy your house, you can click here.
As I mentioned earlier, you can find lenders to approve you for a secured loan as long as you can prove that you’ll be able to afford the debt repayments.
That being said, as a pensioner, you may find it difficult to find a loan provider that is as responsive to your application as they would be for an average individual.
This is normally because many lenders believe that pensioners and older citizens pose a greater risk when it comes to debt repayments. This is due to a combination of them being retired as well as due to their old age.
However, if you keep looking, you will definitely find lenders who will judge you solely on the basis of whether you will be able to make your payments or not.
Be sure to provide all of your sources of income when applying for the loan.
With the right research, you can definitely get approved for a secured loan and that too with a reasonable interest rate.
For more information on secured loans for pensioners, click here.
This depends highly on the types of benefits you have as well as the loan provider.
Typically, if you receive benefits for a permanent condition, then it’s more likely that your application will get approved.
On the other hand, if your benefits are temporary, then you may have more trouble finding a secured loan for yourself.
For more information on finding loans for people on benefits with no upfront fees, click here.
Secured loans are a great way of funding your life and acquiring certain valuable assets.
That being said, they can be risky which is why you should thoroughly do your research and plan ahead before opting for one.