Borrowing from banks and other financial institutions is never easy, especially if you want to borrow a significant sum of money.
In some instances, even if you have a good credit rating without a single hint of poor credit management, banks and financial institutions will still be reluctant to give you a loan. This is especially true if you want to borrow a large amount over a long period of time.
If you are in urgent need of a significant amount of finance for a specific purpose such as starting a business or consolidating debt then you may want to look into a secured loan.
Although you will often be required to pledge an important asset such as your property to the lender as collateral for the loan, getting a secured loan still has many advantages over most other types of credit. For one thing, you have a better chance that your loan application will be approved if you are able to offer an asset as security for the loan.
Lenders will also extend larger loans to people and organizations that offer to put up collateral. The larger the value of the collateral – the better the chances you will get a big loan. You will also pay lower interest rates and typically have more flexibility with the timeline of your repayment.
Always remember to find the secured loan product with the lowest interest rate, as this will greatly affect your ability to afford the repayments over an extended timeframe.
To summarize, a secured loan will be suitable if you:
- Require a large sum of money for a particular reasons (home improvement, a wedding, debt consolidation, a holiday, the purchase of a vehicle)
- Have a valuable asset, such as a home to offer as collateral
- Look to pay the lowest possible interest rate
- Are going to be diligent about making your monthly repayments
- Want to have flexibility in the time length of your repayment process
- Have experienced credit problems in the past or been rejected for unsecured loans
An important thing to remember is that your assets will never be at risk if you make your repayments. Additionally, if you do fall behind on one or two payments, you should always contact the lender directly as they will usually only look to seize your assets as a final resort if you are unwilling to pay or make alternative arrangements.