Explaining secured loans

At Willows Finance we are not only committed to helping you find a suitable loan, but also to help you understand the various loan options available  – and in plain English, too. So, here is an overview of secured loans and what they may mean to you.

Lending and security

Any loan provider needs to try to understand their potential risks in advancing a loan.

That's why you will normally have to provide certain details, about yourself and your financial position, before you will be able to obtain any form of borrowing, whether it is unsecured or secured loans.

Potential lenders will use that information to try and assess what borrowing may be suitable and understandably, what risks they may face in making a loan available to you.

Different lenders may reach different conclusions once they have your information in front of them. Some may have strict lending criteria and may only lend to applicants with impeccable credit histories, while others may be more sympathetic to people who have experienced financial difficulty in the past and who may have a less than perfect credit history.

Typically however, the higher they perceive the risks to be, then the more you may need to pay for your loan.

If the risk of lending to you appears to be too high, lenders will always reserve the right to refuse a loan application.

Matching you with the most suitable loan provider

It is worth noting at this point that as loan specialists, we understand the different lenders’ perception of risks. This means that we can match your application to a loan company who is more likely to approve it.

Homeowner loans

Lending companies will typically welcome any indications that you are willing to share the risks of your loan by undertaking to guarantee it. 

If you are able to do so, you may be able to obtain borrowing at a more attractive interest rate than if you apply for unsecured lending.

If you are a typical homeowner, your home is an asset that can be used, in many situations, to secure loans – this type of lending may often be referred to as homeowner loans. Essentially, that means that you are using your property as a form of guarantee.

In the event that circumstances make it difficult or impossible for you to repay your loan, potential lenders will know that they may be able to recover their funds by taking legal action to gain access to some of the money that you have tied up in your property.

By securing your loan against your property, you are communicating to a potential lender both your confidence in your ability to repay the borrowing and your commitment to sharing any future risks with them.

Secured loans - what you need to consider

If you are willing to secure your loan against your property, you may benefit from both reduced interest rates (compared to unsecured lending) and an increased probability of securing the loan you need.

It is important to note that if you do not keep up repayments on a secured loan (ie one that it is secured against your home), it could be seized through legal processes to recover the outstanding debt.

You may lose your home in such circumstances.

In context

Each individual applicant must decide for himself or herself, whether or not to secure a loan against their property. 

In some cases, the risks to your property may appear to be so small as to make it worthwhile for you to do so.  In other cases, it may be unwise to contemplate putting your home at risk.

It may be difficult for anyone to say whether or not secured loans are for you, unless they have an in-depth understanding of your total financial position. The good news is that we can help you discuss your options and, whether you choose an unsecured or secured loan, we will search the marketplace in order to find you what we believe is competitively-priced lending.