The Advantages And Disadvantages Of Secured Loans by:Michael Challiner
Do you know what a secured loan is? A secured loan is a loan in which the person
wishing to borrow has to give some sort of security, characteristically their property. A loan against a building that is owned outright is called a first charge, whereas a loan secured on a property that already has a mortgage is called a second charge.The amount you can borrow usually ranges from 3.000 pounds to 50.000 pounds, even though you can borrow sums up to 100.000 pounds, over a period of between 3 and 25 years. A penalty may be charged for early repayment of the loan, a fact you should check during the application process.
You may even be able to borrow up to 80 per cent of your property's value, although since the credit crunch, this is now unlikely.
What are the advantages of a secured loan? It's usually easier to acquire a secured loan than other forms of credit, largely because your borrowing is protected by the equity in your property. Secured loans are a way of borrowing large amounts that would usually be impossible by way of unsecured loans and offer the option of paying back smaller amounts over a longer time.
They are a costly choice but, if other channels of credit have dried up, and you need a large amount of cash over a long repayment period, or you have a poor credit rating, then one of these may suit you. There are still some good secured rates available on the market, providing you have a fairly good credit score.
What are the disadvantages? If your credit score is good, then you would be much better off opting for less risky credit, from avenues such as unsecured loans, credit cards offering balance transfer, remortgaging or looking for an extra advance on your existing mortgage. These options all tend to be cheaper.
For people with poor credit history, secured loans can provide an option. A borrower can ask for a 20.000 pound loan protected against a building worth 250.000 pounds over a period of eight years, with a poor credit history, and still get loans from a variety of providers, but the interest rates would be relatively high.
Debt specialists have long said that secured loans are stretched over unnecessarily long periods and are expensive. This makes it longer for the borrower to escape their debt and they could be at risk of losing their home throughout this period.
If I want a secured loan how do I apply? The options for secured loan clients have reduced over the last year: there are now only seven top providers left in the loans market, this has dropped from eighteen providers in twelve months.
Bad press has hit these companies hard - secured loans are quite often seen as a risky enterprise - and a falling property market, has made lenders more cautious about securing loans against property. You can go to a bank to apply for a secured loan, apply over the phone or visit a website. By using the internet you are able to source lots of options.
Although the first part of your application is quick, you have to be given a seven day consideration time to ensure you fully understand the loan agreement Your credit history, the amount of equity you have in your property and your ability to repay the loan will determine the rate you have to pay for a loan.
Will I have any kind of protection? Yes, you will be covered by the Consumer Credit Act 2006, a revised version of the previous 1974 act which only covered consumers up to 25.000 pounds. This revised act means that secured loans clients taking out bigger amounts have been covered since the 6th of April 2008. All loan providers are assessed on their conduct by the Office of Fair Trading. The Office of Fair Trading has the right to fine businesses for unethical conduct and can contest individual consumers' cases.
About the author
Brokers Online ( http://www.life-assurance-bureau.co.uk ) is a financial web site providing clients with great deals on Secured Loans, ( http://www.life-assurance-bureau.co.uk/loans/ ) Life Insurance and Mortgages. Business Process Outsourcing in the Philippines through Web Dot Com by:Michelle Fernandez Corporate Social Responsibility in Website Development and Business Process Outsourcing by:Michelle Fernandez All Encompassing Envelope Printing! by:Muqtada Khalid Six Business Lessons I Learned from Beauty Shop by:Patricia Simoneau The Package IS the Product by:Patricia Simoneau Three Sure-fired Ways Small Town Businesses Can LOSE Customer Loyalty by:Patricia Simoneau Forex Ambush 2.0: 100% Successful Trades, Slow to Trade by:Phil Jarvie Learning To Invest In Foreclosures by:Richard Bleuze IRA on Death, IRD, Taxes and Stretch IRA-How the IRA distribution is dependent upon the IRD by:Rocco Beatrice Installment Loans: For Your Ease Of Mind by:Tristan Todd Four Keys to Offshoring Business Analysis by:Robert Duff The Overlooked Secret of Networking Success by:Kevin Eikenberry Workplace Safety Tips - Attitude and Behavior the Keys to Improve Safety by:Annette Estes