What is a secure loan uk?
A secure loan uk is a loan offered by lenders against an asset owned by the borrower. This makes the loan secure, and reduces the risk taken by the lender. As a result a secure loan uk typically carries a lower interest rate than standard unsecured loans.
How does a secure loan uk work?
A secure loan uk works in a relatively simple way and is also known as a secured loan. A borrower will have to secure their loan against an asset that they own. This is most commonly equity in their home, but can also be a car, painting, jewellery or other items of value that the lender deems appropriate for the type of loan.
To work out how much equity you have in your home, and subsequently how much you can potentially borrow, you need to know the value of your home, and the value of your outstanding mortgage.
Take the value of your outstanding mortgage, from the value of your home, and you will have your equity value. If your home is worth less than your mortgage you are said to be in negative equity and it’s unlikely you will be able to take advantage of a secured loan uk.
Why would I take out a secure loan uk?
There is no limit to what you do with a secure loan uk, and people use them for all different manner of things. The most common uses are home improvements, to consolidate debt or to pay for a new car or a holiday of a lifetime.
Lenders will be most likely to grant a loan to someone who is planning on using the money to make home improvements, as the increase in value to the customer’s home will strengthen their position with the loan.
There are a growing number of families outgrowing their homes as a result of not being able to move home in the stagnant housing market, and home extensions are their only option. Through a secured loan they are able to convert a loft or garage, extend out the side or back of their homes, or to add a conservatory, creating more space in the home, and more often than not increasing the value of the home by more than the extension cost.
A secure loan uk can also be used to consolidate existing expensive debts, because the interest rates on a secured loan will be far lower than on credit and store cards.