Everyone needs assistance with cash flow at one time or another, and borrowing money can often be the most logical solution to financial difficulty. One of the most commonly applied-for loans is a secured loan, available to property owners or mortgage holders. Whether you need a one-off loan to last you until payday, or a longer-term loan for something more substantial, a secured loan may be the perfect fit for you.
A secured loan is a loan which is, quite literally, secured against an asset the borrower owns. This means that if the loan isn't paid as agreed, there is a risk of the asset being taken away from the borrower's possession. Usually, the asset pledged by the borrower is their home, which is why a secured loan can often be referred to as a "homeowner's loan".
You may have heard the phrase "unsecured loan", and wondered how this differs from a secured loan. Put simply, an unsecured loan is more broadly offered to everybody- you don't have to be a homeowner to apply for one, although you do have to have a fair credit score. Rates for secured loans are usually lower than unsecured loans, because of the pledged asset that is at risk.
You may choose to apply for a secured loan if you have been denied an unsecured loan, as there is generally less risk involved. You may also decide to apply for a secured loan if you are looking to increase the mortgage on your property, or if you wish to increase your credit score by proving you can reliably borrow and repay back money on time.
When applying for a secured loan, it is important to remember that there is still high risk involved in this type of payment, despite its perhaps misleading name. You need to be certain that you can pay off your loan on the agreed installments, or you are at real risk of losing your pledged asset.
It can be difficult to know where to begin when considering a secured loan. The best thing to do is visit a few loan-compare websites to find the best rates, and contact further loan companies from there. You should be clear on exactly how much loan you require, and after how long you can realistically pay it all off- not forgetting interest- before you start. If you're feeling uncertain at any stage of the process, it may be worth discussing your options with a loan adviser.