Secured Loan- A Financial Help for Holiday Secured loans as the name implies are loans whereby the lender requires some security or collateral to be help as a prerequisite of agreeing to the loan. This security normally comes in the way of a second charge being applied to your home. This second charge enables the lender to force the sale of your property to recoup their money should you default on the repayments. Since the credit crunch the number of lenders offering this type of loan has been reduced significantly. On top of that the lenders that remain have re-assessed their underwriting criterion which has reduced the number of secured loans that get approved. All of this has also had an impact on the interest rates charged by the lenders, making them slightly more expensive than they used to be a couple of years ago. Are bad credit secured loans still available? Because of the security aspect of a secured loan the lenders are still happy to lend this type of loan to people who have a bad credit record. They will however restrict the loan to a lower LTV (loan to value), and also charge a higher interest rate than those charged to people with a good credit record. What does LTV mean? This is the terminology that the lenders use to determine how much equity they will require you to have in your property. It is calculated by adding the total amount of any secured loans and your outstanding mortgage balance and expressing that as a percentage of your property value. So if you owned a property worth ÂŁ100,000 with a mortgage of ÂŁ50,000 and the lender allowed a maximum LTV of 75% you would be allowed to borrow up to another ÂŁ25,000 in the form of a secured loan.
Secured loans are available for amounts from ÂŁ5,000 to ÂŁ100,000, and for terms of up to 25 years. This makes them an ideal solution for anybody that wants to borrow a larger amount of money or wants to spread the repayments over a longer term to reduce the monthly cost. It is however important to remember that the longer the terms that you spread the agreement over the more interest that you will be charged. Bearing that in mind you need to set the loan up for the shortest term whereby you can comfortably afford to meet the repayments. This could save you a considerable sum of money. The main two purposes that secured loans are taken out for is to consolidate outstanding credit card and other debts, and to carry out home improvements. They can however be taken out for a great many reasons including buying a new car, taking the holiday of a lifetime, or buying a new boat. In fact they can be taken out for any legal reason whatsoever. So if you have the need to borrow a large amount of money for whatever reason, a secured loan would be a logical place to start looking. So long as you are a homeowner with a mortgage and you have enough equity in your home.
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