What is a cheap secured loan?
A cheap secured loan is a loan available to borrowers which is offered by lenders when the borrower agrees to secure the loan against as asset they already own. The majority of cheap secured loan cases will see the loan lent against equity owned in a house, but any asset approved by the lender can be used.
As well as equity in a home, common assets used to secure a cheap secured loan are cars, artworks, jewellery and paintings. Businesses may use business possessions as leverage for cheap secured loans in the business environment.
How does a cheap secured loan work?
A cheap secured loan is one of the simplest types of loan agreement where as asset is used as leverage to help the lender secure the loan. A cheap secured loan will see the borrower work out how much equity they have in their home, or how much their other asset they wish to borrow is worth.
Generally this will give them a budget to work out how much they can borrow, although some mortgage providers may only let a borrower borrow a certain percentage of the equity free in the property to protect their own investment. When buying a cheap secured loan you may need to work out how much equity you own in your property and this is a relatively simple procedure.
To work out how much equity you have in your home you simply need to deduct the amount of outstanding mortgage you have left, from the current value of your home. If you find that you owe more money than your home is worth, you are said to be in negative equity, and this my prohibit you from taking out a cheap secured loan as you have nothing to secure the loan against.
Why would I take out a cheap secured loan?
There are many reasons to take out a cheap secured loan or homeowner secure loans, with the most common reasons being home improvements. A garage or loft conversion, extension or conservatory will all add value to the home, making the loan even less of a risk for the lender, who knows that should they need to repossess your property as a result of your failing to keep up your loan repayments that they will be able to and recoup their money as your home’s value will have increased.