Why secured loans may be suitable for you

by Ceri Harris28.11.2013

If you are looking to borrow money, there may be reasons why secured loans would be worthwhile considering compared to unsecured borrowing:

  • unsecured loans are where you borrow money without guaranteeing it against an asset. Secured loans are normally linked to an asset (typically property) - that means that if you default on your repayments, the loan provider may insist upon the sale of the asset concerned and the recovery of their loan from the proceeds;
  • this means that compared to unsecured lending, providers see loans that are secured as being of lower risk than those that are not secured (all other things being equal). In other words, should you default on the loan repayments, they stand more chance of getting their money back if the borrowing is secured;
  • some providers also typically regard a borrower's willingness to share the risk, by securing the borrowing against an asset, to be an indication of their own confidence in their ability to service the loan during its term;
  • the fact that you have an asset that can be used to secure the loan may also be a positive communication about your overall financial status;
  • for all these reasons, typically secured loans (also known as homeowner loans) may be available at a more attractive interest rate than those that are unsecured - you may also find that it is possible to borrow larger sums of money if you are willing to secure the borrowing;
  • before you can typically use your home to secure a loan, potential providers may need to satisfy themselves that you have sufficient equity in the property to enable them to recover their monies should the worst happen;
  • although some loan providers’ policies may vary on this point, typically it may prove to be difficult to secure borrowing in your name against a property that is jointly owned with a spouse or other parties (other formalities such as legal charge documents may be required etc) - in such situations, please do not hesitate to contact us to discuss your requirements and we’ll be pleased to offer help and advice;
  • if you have negative equity (i.e. you owe more in outstanding mortgage than the property is worth in the marketplace) then it may prove to be difficult to secure a loan against it;
  • it is always important to note that you may be forced to sell your home should you be unable to keep up repayments on a loan secured against it.

Used responsibly, homeowner loans can be deployed to significantly change aspects of your life for the better and to even reduce your overall debt burden (e.g. through credit consolidation loans).

Using secured loans may help you to find the finance you need and at a cost-effective price.