Health And Safety, Home Safety, Equipment Safety Products

Why Take A Secured Loan?

Why would you want to take on a secured loan? Well you could have any one of a number of reasons to borrow a substantial amount of money. It may be to provide the money for some expensive improvements to your home such as a new kitchen or an extension. Maybe you need to carry out some major repair work to the house like a new roof. It could be to assist with some other large purchase that’s likely to be a once in a lifetime investment or at is unlikely to be repeated for a good number of years. A secured loan or, as it’s often called, a homeowner loan is something you might use for debt consolidation especially if your various debts add up to a substantial figure.

Of course these are all reasons for taking out any kind of loan so why would you go for a homeowner loan instead of an unsecured deal? One good reason would be that because the lender has the security of a charge on your property you’ll usually be offered a lower rate of interest on a secured loan. Often it will be quite substantially lower. This can be particularly useful when you want to use your homeowner loan for debt consolidation where it’s likely that some if not all of the various debts you want to sweep up will be on quite high rates.

Not only that but for much the same reason you’ll have the opportunity to make the repayments over a much longer period than you would with an unsecured loan. That could well be quite important when you borrow large sums, because otherwise the repayments might be prohibitively high.

Coming back to the subject of debt consolidation, the whole idea is that by gathering together all your hotch-potch of high interest rate debts, not only will you tidy up the repayments on different dates into one each month but you should also find that the new single payment is quite a bit less than the total of all the separate payments. The lower rate of interest on your new loan will help with that but it’s the longer term that really makes the difference.

You can only use a homeowner loan if you have sufficient equity in your property to cover it but if you have that might be another factor in your deciding to take that option rather than an unsecured loan. If you’re in the happy position of owning a house whose established value exceeds the balance of your mortgage by a huge margin you may well take the view that all that spare value is just sitting there doing nothing for you until you use some of it as collateral.

Say you’re sitting in a house worth let’s say, £300,000 and the outstanding balance of your mortgage now is only about £200,000, that’s £200,000 worth of equity you can use to secure your homeowner loan which probably won’t be for anywhere near that amount. You might as well make use of that now when it will be most useful.

Naturally there are still the repayments to consider but if debt consolidation is the aim and you’re managing to service your various commitments now you should have no problem coping with the new lower repayments. If you want the loan for some other purpose you’ll have to get your calculator out to make sure the figures add up for you as well. Not everyone who lives in a high value property has a high income. It’s surprisingly easy to be asset rich and cash poor, particularly in later life.

Author Bio
John Winner

The Home Loan Shop

www.thehomeloanshop.co.uk

Why Take A Secured Loan? / Author: lexisclick

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