You're a savvy loan shopper. You've done your research and read all the advice, listened to the experts and you know what they have to say about taking out secured loans. They are the financial experts that rant on the subject of credit and personal debt on the TV and in the papers. They are interested in keeping you from making what they view as a big financial mistake. And the general advice that they give about secured loans is Don't Do It - in upper case letters.
But even they admit that there are times when secured loans make good sense. First, though, let's take a look at why they tell you that secured loans should be a last resort. There is ONE reason - and it's a good one:
You could lose your home if you fail to make the payments.
Secured loans are popular with lenders because, frankly, people are far less likely to default on them. There are some very good reasons for that:
1. People who own a home are generally - not always, but generally - more financially stable than those who don't.
2. People will think far more carefully about missing payments and defaulting on a loan when they know that they risk losing their home. The loan payment moves up in the list of priority accounts and gets paid first.
3. If people DO default on the loan, the lending company has the option to take possession of the house and sell it to recover their money.
That last reason is the single big reason that the experts will tell you that you should never take out secured loans - you are risking your home if you fail to make the payments.
But, as we said, there are times when secured loans make a great deal of sense. They may be your only choice, or your best choice. Secured loans are probably your only choice if:
- You require a loan of more than £25,000. It's difficult to find anyone to lend you that ammount without some sort of guarantee against the possibility that you won't repay it. Few lenders will make unsecured loans for more than £10,000 in fact.
- You want to take more than five years to repay your loan. In most cases, lenders will only consider unsecured loans for terms of up to five years. When it comes to secured loans, though, most lenders are willing to extend terms as long as 15 or 20 years for repayment.
- You intend to use the loan to extend your home or make improvements to it. If you're planning extensive renovations to your property, it only makes sense to use the money you have invested in your home to leverage the improvements that will add value to your home.
- Your credit score is too low to qualify you for an unsecured personal loan. This is probably the biggest reason that people turn to secured loans. Whether it's because of financial problems in the past, or the fact that you have an unconventional job without regularly paid wages, you may have trouble qualifying for a persona loan. In this case, a small loan secured on your home and repaid in full and on time can actually help improve your credit score so that the next time you need a loan, you CAN qualify for an unsecured loan.
We don't mean to make light of what is honestly very good advice. Secured loans are serious, long term commitments that do involve the risk of losing something very important to you. That's why it's vital that you know and trust those with whom you do business. You should shop around and compare secured loans with one another so that you can be sure you're getting the best loan at the best terms. This can be very time consuming which is why you can save time and let us compare over 200 loan plans for you at “www.advancestart.com".
Rachael Gallant has worked for the UK financial services market for a number of years specialising in secured loan applications for UK home owners. She's a busy mum and understands how time consuming it can be to sort through the hundreds of different offers whilst trying to interpret the associated jargon. That's why she writes clear, easy to understand guides exclusively for “advancestart.com" to help UK home owners find secured home loans that best suit their personal circumstances. For information on 3 easy steps to compare over 200 loan plans for home owners in minutes visit “http://www.advancestart.com"