Secured loans: Security guaranteed

Four base rate hikes since August 2006 surely has to have its effect somewhere. So, it’s not surprising that recent reports by leading comparison sites seem to point towards interest discrepancies in different loan products. Comparison reports show that while the average interest rate on unsecured credit from the range of £500 to £5,000 have increased to more than 1.3 per cent over the past six months, the interest rates on secured loans have remained the same.

If a comparison is made regarding the APRs on loans of £1,000, then in November 2006, the going rate was 14.63 per cent; whereas in June 2007, the average rate is somewhere around 16.2 per cent. In contrast, the accepted rate for a loan of £5,000 has dropped about .12 per cent and is around 8.62 per cent.

In such a scenario, if one can afford to pledge a home, one may look at the technicalities of secured loans. These loans are long term loans that have to be repaid between 5 to 25 years. The loan amount depends on a number of things, such as the available equity on the home of the borrower. Generally, the range runs from £5,000 to £250,000. The interest rates to be charged on these loans are comparatively lesser than unsecured loans. For starters, there are different plans, such as discounted, flexible or fixed interest rates; although, each and every customer may not be liable to get a discounted rate.

Secondly, there are a lot of schemes through which customers can save their pennies. These include repayment holidays, accelerated payments without penalty, full refund of PPI (Payment Protection Insurance), as well as other facilities like cash back options and free gifts.

Secured loans are also the best bet for bad credit holders because it allows them to get quick approval inspite of their dubitable credit score. This is partly because you would be providing the lender security in the form of your home. Therefore, in case you are not able to make the repayments on time, the lender doesn’t lose out. He has the possibility of recovering his money any which ways.

As a norm, lenders give out loans up to 90 per cent LTV or loan to value. However, in certain cases, lenders may even give out loans up to 125 per cent LTV. These cases are rare. For starters, your location, size of house, any sizeable renovation, change in floor plan, suitable addition of rooms also matter. The lender will take into consideration all such things that will add on to the real estate value of the property. As the amount associated with secured loans are high, these loans are most suitable for home improvements or consolidation of debts. However, do take care to manage your budget properly. Failure of payments may also lead to your home being repossessed. There are various FSA related sites that give good money saving advice. One such site is < a href=http://www.moneymadeclear.fsa.gov.uk/>www.moneymadeclear.fsa.gov.uk.

Additionally, if you can afford to take out insurance on the loan then go for it. Although an insurance plan hikes up the repayment amount, it is a necessary evil because it protects you in case of illness or sudden unemployment wherein you may not be able to pay back the monthly amount. A PPI protects you against life vagaries and is therefore a wise option for homeowners.

There are many ways to apply for these loans. You can either go to some big banks or apply with lenders or financial brokers also. Most of these applications are available online. Al you need to do is fill up the online form and let the financial provider know about your personal finances and requirements. The rest will be done by the lenders.
In case you are apprehensive about the loan type and would like further information about it, then you can visit any FSA authorised sites for more clarification.