Securing a loan against some form of collateral can be seen as risky, yet it may be the most suitable option available for those who need to obtain a large amount of money quickly.
What is a Secured Loan?
Secured loans are protected by an asset of some sort – usually a house or a car. However, this is not for peace of mind for the customer – rather, it is the bank or loan provider that will benefit from this security as if there are problems with them receiving back their money, if all other attempts at recovering the debt fail they can take possession of their customer’s property and sell it.
These loans can be taken out as personal loans in order to make big purchases such as home improvements. Alternatively, a borrower may want to take out a secured loan as a debt consolidation loan to combine their existing debts so they are not juggling multiple repayments. Such debt consolidation loans are becoming increasingly popular.
Secured loans are in direct contrast to unsecured loans whereby nothing of value is held against a loan. This loan type is generally considered a lot less risky than a secure loan as if a customer fails to repay an unsecured loan, their lender will find it much more difficult repossess their home.
Benefits of Secured Loans
In some ways though, secured loans can provide benefits that other loans do not. Because the loan is secured against a valuable property, secured loan rates are normally substantially cheaper than would be the case with an unsecured loan. In some cases, the secured loan rate is on a variable rate basis linked to the Bank of England base rate, which can result in cheap interest payments when base rates are particularly low. But potential borrowers should pay attention to the terms offered by banks, building societies, credit unions and online lenders as they often have discretion to shift this rate a lot higher. Borrowers should also take care to understand any associated loan charges.
The best secured loans are those which combine low interest rates with high borrowing amounts. Typically, banks will lend anything from £3,000 to £50,000. This may increase depending on the lender, but the amount available to customers will ultimately depend on how much the asset they are securing the loan against is worth.
Bad Credit Secured Loans
Borrowers can apply immediately for secured loans online and find out within 24 hours whether they have been approved or not. Nowadays, it is increasingly easy for applicants to obtain them even if they have a history of bad credit. Bad credit loans are becoming more prominent on the market, being specifically designed for those affected by a bad credit rating. A bad credit secured loan is designed to help people build up their credit score, though they are certainly not one of the cheapest secured loan types available as interest rates can be higher than other secured loans due to the risks involved. Indeed, it may be preferable for people with a bad credit history to seek debt management advice before taking out a loan of this type.
Secured Loan Calculators
A secured loan calculator can be used to break down the monthly repayment figures required for a secured loan. Secured loan calculators are incredibly useful tools for those taking out a large sum of money so they can work out the best secured loan repayment method for them. Specialist comparison sites are equally useful for applicants to source the cheapest secured loans available.