When a loan is taken against a property that is placed as a collateral with the lender then in that case the borrower is availing secured loan. This type of loan is generally given preference because of many benefits attached to it. People like to opt for secured loan as they are in a commanding position over the vital matters of deciding on rate of interest and the amount of loan.
Under the option of secured loan, a borrower has to offer any of his property to the lender as a collateral. The collateral works as an assurance to the lender that his loaned amount is safe. A borrower can offer house, real estate, car, bank account etc as a collateral. But the lenders may prefer a saleable collateral like automobile.
Those who are looking for greater amount to borrow generally prefer secured loans. People facing bad credit history are also often a candidate for secured loans. Then there are borrowers who find it difficult to get unsecured loans and then they think it better to get loan against their property.
One can use secured loan for various personal purposes such as house improvements, buying a car or enjoying holiday. Secured loans are of big help to borrowers who need to consolidate their previous many debts so that they may improve their credit report and may get rid of high interest rate debts.
Lenders find out the value of the collateral before they decide on the loan amount. If the collateral has higher value in it, the lender will not only be willing to offer higher amount but also a lower interest rate. Usually secured loans are provided in the range of £ 3000 to £ 75,000.For greater amount the collateral value should be higher.
Secured loans can be availed for a comfortable duration of up to 25 years and one can choose between the option of paying installments either monthly or quarterly.
However, there is a risk involved in secured loan. In case the borrower fails to pay off the loan then the lender is likely to take the course of repossession of the property to get back the loaned amount.
So before you go for a secured loan make sure that you have calculated the exact amount you are going to ask the lender. Do not borrower a larger amount as it may become a huge financial burden later and create problems.
Always compare different loan packages that are offered online by number of lenders. This helps in availing secured loans at lower interest rate.
Applying for secured loans is a very simple and quick process because of the Internet. Few clicks on the computer and you have applied for the loan.
Secured loan thus is seen as the best option for those borrowers who look for great amount of loan at lower interest rate. Though there are pitfalls but they can be avoided by taking extra care about the aspects of the loan.