What is a secured personal loan?
A secured personal loan is a loan offered to you by a lender, but that is secured against something you already own. This is most commonly equity in your home, but can also be a car, painting or some jewellery.
The lenders can offer a secured personal loan at a lower interest rate than an unsecured loan because there is less risk they won’t see a return from the borrower as they can repossess and sell the item you have secured the loan with.
A secured personal loan does potentially put your home at risk, if you fail to keep up your monthly repayments.
How do I know if I qualify for a secured personal loan?
A secured personal loan will be lent to you is you have a sufficient credit rating, and the lender doesn’t feel that you have borrowed too much already, and you have something to secure the loan against.
If you own a house, but are in negative equity, there is a chance that the lender will turn you down, because you have already borrowed the entire value of your home, and more. To borrow money against your home, you generally need permission from your mortgage lender, and at least the amount of money you want to borrows’ worth of equity in your home.
To work out how much equity you have in your home is relatively easy. You must first find out how much of your mortgage you have outstanding, and then work out the value of your home. If you are unsure of its value you can look on the internet at the sale prices of homes around you in recent times, and this will give you a better idea of your homes current value.
Then simply take the amount you still owe on your mortgage from the value of your home and you will know how much equity you own in your home. A secured personal loan is also known as a secured homeowner loan.
What happens if I don’t pay my secured personal loan?
Not paying your secured personal loan can lead to your home being repossessed, although generally lenders will work with you to find a more suitable repayment solution before they resort to such measures. Because you can lose your home as a result of defaulting on your secured personal loan payments, it’s strongly advisable to only take such a loan if you know you can afford it, as there is so much at stake.