Secured personal loans are one of the most popular ways of borrowing a large sum of money over a long period of time. To take out a secured personal loan you must either have sufficient equity in your home, or own something else that the loan provider can secure against the value of the loan that they offer you.
A secured personal loan works in a very simple way. The lender who lends you the money in the first place will draw up a contract that secures the secured personal loan against something you own, which most of the time is a portion of your home.
If you fail to keep up your loan repayments and default on your loan then the loan company are entitled to seize your asset, and sell it to recoup their money.
The most common way of getting a secured personal loan is to borrow the money against a portion of your house that you own. This means you must own equity in your home.
To work out how much equity you have in your home, simply find out the value of your home, and the value of your outstanding mortgage debt. If a customer has a £100,000 home, and an £80,000 mortgage, then they own £20,000 of their home, and have £20,000 equity.
To take out a secured personal loan against the equity on their home they may need to contact their mortgage provider for permission.
If you fail to keep up with your monthly payments, then the loan provider will repossess and sell your home, giving you the money to repay your mortgage, and taking the rest to repay the money you owe them, plus any costs associated.
In this country secured loans are very popular because of their price. Secured personal loans have a cheaper interest rate attached than an unsecured loan because the lenders can almost guarantee a return on their investment, whereas unsecured loan lenders can’t go after your home if you fail to repay your loan.
Secured loans tend to be offered over a 5 to 25 year period, for values from £7,500 to anything up to £100,000, and are usually taken out by customers wanting to install a new kitchen, or pay for an extension to their house. Conservatories, loft conversions and garden landscaping are also common uses.
For information on the types of secured loans available visit our website today.