If you are looking to take out a loan, you may find yourself wondering which type of loan you should go for. There are various options you can consider these days, but the ones you are eligible for will depend on your circumstances, credit score, and financial status among other things. In order to ensure you get the right loan for your needs, it is important to familiarise yourself with different loan options, which includes the secured loan.
So, what is a secured loan? Well, as the name suggests, it is a loan that is secured against some form of collateral, which is most commonly the home. These loans are, therefore, popular among homeowners with some level of equity in their property. The amount you can borrow does depend on your equity levels along with your credit score and financial circumstances. There are many benefits to choosing this type of loan, some of which we will look at below.
Some of the Main Benefits
So, what are the key benefits of a secured loan? Well, one of the things to bear in mind is that if you have a low credit score, you may represent too high a risk to lenders for a standard unsecured loan. This could mean you are unable to get the finance you need when you need it. With a secured loan, the risk to the lender is much lower despite your damaged credit. This is because there is collateral for the lender to use as protection, which means you are far more likely to get the loan you need no matter what your credit is like.
Another key benefit you can look forward to is the higher borrowing levels available with a secured loan. The amount you can borrow with this type of loan depends partly on the amount of equity you have in your home, as the loan is secured against this. So, if you have a large amount of equity in your property, you may be able to borrow a far higher amount of money compared to an unsecured loan. This is ideal for those who need to raise bigger sums for things such as the holiday of a lifetime, kids’ educational costs, or to make major home improvements.
You can also look forward to lower interest rates with secured finance compared to unsecured, although the exact rate of interest will depend on how much you borrow, how long for, and your credit score. However, the reduced risk to the lender means you can often get favourable deals on your finance when you opt for this loan type.
Making Applications Online
It is worth noting that with a secured loan, there is more involved in the process than an unsecured one. While you can make your application online for a decision in principle, the lender will need to verify various facts and check a range of documents to ensure everything is above board. So, you should make sure you put your application in with plenty of time to spare.