A secured loan is a better option for homeowners if they are looking for a long-term finance that will cover everything from improving their home interior to paying off credit card debts. These loans are more ideal as larger amounts can be borrowed, have a longer repayment period and have greater flexibility.
Homeowners are more attracted to these type of loans as they will normally have a lower interest rate and the repayments are usually made monthly. However, secured loans can be risky as they are secured against your home, meaning that if you fail to keep up with the repayments, the lender can take ownership of your home.
Here are the benefits that a secured loan can provide you with:
Easier to obtain
If your credit rating isn’t as high as it should be, you may find it hard to borrow other loans such as an unsecured loan.
However, because a secured loan uses your home as collateral and poses less risk to the lender, having a low credit rating isn’t that big of a deal. Now, that doesn’t mean to say that your credit rating isn’t important. The first thing a lender looks into when deciding to offer you a loan is your credit rating, and if your credit rating has a very poor score, you will be less likely to receive approval. There are many steps that you can take to rebuild your credit rating.
If you would like to find out what causes a poor credit rating, take a look at our blog on ‘5 Factors that cause a poor credit rating’.
Large Amounts can be borrowed
Since the loan is secured against your home, you have the chance to access large funding amounts at a better rate than standard unsecured loans. By taking out a loan through Basik Money, you can borrow from £3,000 and in certain circumstances up to £2.5 million.
Longer Repayment Period
While unsecured loans have a flexible repayment period, secured loans will often give the borrowers between 3 to 30 years to repay the loan. This will give you a sense of relief knowing that you can borrow a large sum of money without having to pay it back in a short space of time.
Lower Monthly Repayments
As said before, since the loan is secured against your home you will be able to access large amounts of money at a better rate, ultimately lowering your monthly repayments. Also, due to the longer repayment period, this normally reduces the amount paid each month by the borrower.
Now that we have gone through the ways that you can benefit from a secured loan, lets look at what you can actually do with your secured loan:
Pay off credit card debts
It is hard to apply for a loan if your credit history is quite poor, which is one of the many reasons why homeowners will take out a secured loan. Plus, credit card interest rates are far higher and costlier, whereas a secured loan tends to be less expensive over the long haul.
However, credit card debt is unsecured debt, meaning that the homeowner will not have to worry about losing their home if they fail to keep up with the repayments. Whereas if the owner takes out a secured loan, they must keep up with the repayments otherwise they will lose their home.
Whether you are selling your home or renovating a room for your own satisfaction, using a secured loan will benefit you greatly. Paying for home renovations can be highly expensive, however, with enough equity in your home you can borrow that money and pay it back over a long period of time with a lower rate of interest.
However, if you are planning on selling your home and wish to make some renovations to make it more appealing on the market, do not expect a higher sale price. No matter how much work or money you put into remodelling your home, the worth of your home will stay the same.
If your child is planning on going to university, using the equity in your home to pay for intuition fees may be a good option to take, rather than applying for a student loan and paying higher interest rates.
However, you still need to take retirement into consideration. When the time comes that you can no longer work, you need to make sure you have enough money to cover yourself in the long run. If you feel that you can pay for your child’s intuition, plus save for your retirement, then applying for a secured loan will be the best option for you.
Homeowners may often use the equity in their home to invest in the stock market to get a higher return rather than what they pay on interest.
Though, there is no assurance that the value of your investment will rise. In fact, you could even suffer from a loss, but if you feel that you can afford this then using your home equity as investment may benefit you.
Your next steps!
If you are interested in applying for a secured loan, then get in touch with Basik Money today on 0330 041 2299 to get free impartial advice from one of our qualified advisors.