First Time Home Owner Mortgage Loans
First time home owners are sometimes surprised at the complexity of the mortgage lending process. If you are searching for a mortgage and you have never owned a home, there a few things you can do to make the mortgage process less confusing. First...
Guide to Secured Loans
Here is a useful guide to secured loans. A secured loan is a loan that a lender provides on the understanding that a property is secured against the loan. Secured loans are also commonly known as a homeowner loan, home loan or home owner loan. ...
How Loans Can Improve Credit
Individuals who have had credit problems in the past know how much of a hassle it can be to try and get a loan with bad credit. It can be worth all of the trouble, though... after all, not only are you getting the loan that you need but you're also...
Instant Payday Loans - How They Work
A payday loan allows consumers to borrow up to $1000, depending
on their state's laws and the consumer's monthly income. Payday
loans are intended to be short-term loans, helping get through a
financial emergency until your next payday. Online...
Wedding loans – when wedding bills are postponing the wedding bells
Somewhere when you least expected, you find the person who you know you are going to share your life with. You met that wonderful person. And it is a blessing that you are going to walk down the aisle with that person. You want to share it with...
Secured and Unsecured Loans
One of the most basic decisions when it comes to taking out a new loan, is whether to opt of a secured or an unsecured loan. Before we discuss the advantages and disadvantages, you should know that a secured loan means that if you cannot meet the repayments, the lender has access to an agreed security, such as your home or car, to pay off the loan.
This is the huge draw back of secured loans. The asset they are secured over is usually very important to the borrower. For most people, the two most important assets they own, and are least willing to part with, are their home and their car. Your home can act as security whether it is currently mortgaged or not. The size of the loan will also depend on, among various other factors, the value of the asset. For example, if you home is worth £50,000 it is extremely unlikely that a lender will grant you a loan of £60,000. At the same time, just because you have significant assets to secure the loan, does not mean the lender will lend you the full value of the asset. Factors such as your income, your current indebtedness, and your repayment capacity will also be critical.
Secured loans can be used for any purpose, typically debt consolidation or home improvements. However, since the loan is being secured over your home, many short term uses will inappropriate. While borrowing against
your home to invest in home improvements may make sense, borrowing against your home in order to buy groceries and pay your day to day bills would not be so appropriate.
Secured loans, as well as being possibly larger than unsecured loans, will also be likely to have better terms and rates. A lender should be more willing to give you a lower interest rate on a secured loan because his risk is less. Should you default on the loan, he can move in on the house, and sell it. He is therefore, virtually guaranteed not to lose the money he lends you. If the loan is unsecured, it is significantly more risky, as should you become bankrupt, he may end up with nothing. While such outcomes are rare, and hopefully will not happen, they are the bread and butter of how interest rates are set.
Lenders will typically be more willing to lend on a secured basis too, for the same reasons. Therefore, if you find that you cannot get unsecured credit, you may try secured credit as a second option.