by Bwalya Mwaba
What is a Secured Loan? A secured
loan is any loan that is secured on your home or property. It is any loan which
requires you to provide the lender with some form of security other than just a
promise to pay. The security will be your property or home. The property may be
mortgaged or owned outright.
If you agree to a secured loan on your home, you should remember that, although
the property remains in your possession, it can be repossessed by the lender if
the loan and the interest are not paid according to the agreed terms. The lender
will then sell the property in order to recover the money you borrowed plus any
additional costs incurred in recovering the money.
Secured Loan Benefits
In many instances secured loans can be repaid over a longer period with a lower
monthly repayment. The interest rate will be lower on a secured loan than on a
comparable unsecured loan. A secured loan may also offer more flexible repayment
1. If you're a homeowner, you may get a lower rate through a secured loan
using your property as security. By taking out a secured loan, you are agreeing
to allow the forced sale (foreclosure or repossession) of the asset in order to
pay back the loan. The risk to the lender is reduced so the interest rate
offered is lower. This is why secured loans tend to be cheaper than unsecured
loans and other forms of borrowing. The lender has the added benefit of
security, which provides protection in the event of your inability to repay.
2. Secured loans are more easily accessible to those with a poor credit record.
This means that persons who are self-employed, or who have recently changed
jobs, or who have adverse credit (ccjs, arrears, defaults, etc.) can take out a
3. You can borrow larger amounts and repay over a longer period. The amount
available usually ranges from £3,000 to £50,000, although some lenders will
consider lending more. Compare this to unsecured loans where you're only allowed
to borrow up to £25,000. If you wish to borrow a larger amount or if you require
a longer period in which to repay the loan, secured loans may be the most
suitable for you.
4. You can consolidate more
expensive borrowings into a single much cheaper monthly payment. You may choose
to take out a secured loan in order to consolidate debts and replace
high-interest loans with a low-rate loan. The loans being consolidated may
include higher purchase loans, unsecured loans and credit cards.
Useful Points to Remember
Before you take out a secured loan, make sure that you can afford the monthly
repayments. Also, read the loan agreement carefully and pay particular attention
to the rate of interest required, the term of the loan, the repayments required
and the total amount payable. If you fail to repay the loan, the lender may
repossess your property or home and sell it to repay the loan. If you borrow
money using a mortgage as security you are agreeing that the lender can claim
the mortgaged property if you fail to keep to the agreement. Your home is at
risk if you do not keep up repayments on a mortgage or other loan secured on it.
You can read some more articles about secured loans at:http://www.commercial-mortgage-
© Copyright Bwalya Mwaba writes for the The Commercial Mortgage Guide.
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