Maybe you want to purchase your first home. Maybe you want to buy a new car to replace your clunky, second hand one. Or maybe you just need a large amount of money for a business, vacation or home renovation. Whatever the case is, you can usesecured loans to raise the money that you need.
But what exactly are secured loans and how do they work? In this post, we’ll walk and guide you through in understanding the loan product. If this is your first time applying for a secured loan, then continue reading until the end.
What are secured loans?
Secured loans are loans that require collateral. If you’re buying your first home or vehicle, for example, the property you are purchasing serves as security for your loan. If you fail to pay your mortgage, your lender can recover your property in the process. Since the risks are lower on the lender’s part, this type of loan usually has lower interest rates. Getting a secured loan is also an ideal way to build your credit if you’re just starting out.
What are the different types of secured loans?
There are numerous types of secured loans available in the United Kingdom. If you’re borrowing money to buy a new home, then what you need is a mortgage loan. Car loans, on the other hand, are available for people who need financial assistance in buying a new car. If you’re a vehicle owner and you want to secure the loan against your car then you should apply for a logbook loan. Other types of secured loans involved other items for security such as bonds stocks, certificates of deposit and more.
Who can apply for secured loans?
To be able to apply for a secured loan, there are a number of requirements you need to meet. For one, you need to be of legal age to be eligible. Two, you must reside in the United Kingdom and three you must provide proof of sufficient financial resources. Because loan offers are larger with secured loans, borrowers are also required to have a good credit history. In case you have bad credit, there are secured loans specific for borrowers like you. But it’s important to note that these bad credit loans usually come with higher interest rates.
What are the risks when applying for a secured loan?
With secured loans, an asset is always on the line. As soon as you signed the debt agreement, you’ve agreed to let your lender recover your collateral in the event that you are not able to repay the loan anymore. While interest rates are lower for secured loans in general, you’ll have a bigger risk to face when you go for this type of loan. Property repossession is always a possibility, which is why borrowers are advised to carefully plan your borrowing to avoid losing your home or vehicle along the way.
Are you ready to obtain your first secured loan?
Now that you understand what secured loans are and how they work, the next question to ask yourself is this: Are you ready for your first secured loan?
Borrowing money, when done right, is a reasonable financial move to owning your first home or vehicle. With a secured loan, you can easily raise the amount of money you need and just pay for a fixed amount per month. If you’ve planned carefully and you’re sure that you can afford the monthly repayments, then there’s no reason why you shouldn’t apply for your first secured loan. As long as you can afford the loan, you shouldn’t have any problems along the way.