Before you consider a secured loan such as a car loan or a mortgage loan, you should understand that there are higher risks involved than if you settle with an unsecured loan. With that in mind, it is highly recommended that you plan your loan carefully. Here are some tips that can help you when applying for a secured loan:
Decide how much to borrow
One of the first things to decide on when applying for a secured loan is the amount. How much do you need to meet any specific financial need you have at the moment? Whether you’re planning to buy your first home or you want to consolidate all your debts, the amount should be clear from the start. When deciding on how much to borrow, also take into consideration your financial resources. Decide to borrow based on your financial capability and you’ll avoid problems of delayed or missed payments in the future.
Decide on how long to borrow
With larger loan amounts offered by secured loan providers, the repayment terms can be flexible and long. When you’re planning your loan, this is one factor to carefully work out. Some loans, for instance, offer a lengthy 25-year repayment period for a £100,000 mortgage loan. You can opt to apply for the maximum term or you can shorten it to 20 years or even 15 years if you’re up to it. When working out the repayment term, be realistic. Set the term in a way that you can commit to your monthly repayments without compromising your budget.
Compare interest rates
With a clear borrowing plan on hand, you’re now ready to compare the price. Most secured loans come with lower interest rates but higher risks. If you have good credit then you’ll have plenty of options to compare. When comparing prices, the one key thing to look at is the representative APR attached to your loan. APR, which stands for annual percentage rate is already inclusive of your loan’s interest rates, admin fee, completion fee and other related fees.
Find the best deals
To find the best deals on your secured loan, there are a couple of things you can do. If you have an existing mortgage lender, ask them. If you are a good repayer, chances are your lender has special terms to offer. You can also use online comparison sites to find the best deals. These websites often have a list of the best lenders offering secured loans in the UK. For non-internet users, you can seek recommendations or perform the old-fashioned way of comparing loans by inquiring from different banks in your area.