loan-sense.co.uk

Secured loans sometimes have a rough reputation, which is occasionally well-deserved (but we’ll get on to that later). Horror stories including sky-high APRs, and the threat of repossession strike fear into the hearts of many would-be borrowers, not to mention those dodgy daytime TV ads!

However, in certain circumstances they can be extremely useful and viable solutions; and because these 2 different positions genuinely co-exist despite the apparent contradiction, here’s a brief report for anyone considering what to do about their credit arrangements, to help you to understand some of the main pro’s & cons of secured loans.

The Pros…

Secured loans are available to most customers with a property on which it may be secured, so for homeowners who have been unfortunate enough to have racked up some adverse credit history, a secured loan can be a real help.

Secured loans are available for higher amounts. Unlike unsecured loans, which are usually limited to amounts under £25,000, a secured loan can be for almost any amount, secured loans specialist The Loan Helper for example can arrange loans for up to £500,000.

Secured loans are flexible. You can arrange your secured loan repayments over a period which suits you best, usually anywhere between 3 and 25 years.

Secured loans are a real alternative to a remortgage. If you’re considering remortgaging to free up some equity for other uses, you should consider a secured loan as an alternative. depending on the terms of your current mortgage, proprty equity, credit profile etc, a secured loan may be a more affordable option.

The Cons…

Secured loans have a reputation for charging very high APRs. However, this reputation is not necessarily justified – many secured loans are highly competetive compared with many mid-market unsecured loans. But there are of course loans available from lenders who are prepared to take on the ‘riskiest’ clients, with numerous CCJs, defaults and mortgage arrears, even bankruptcies and IVAs are no barrier to borrowing from such specialist lenders, however as you might imagine, such borrowers have much higher delinquency rates than the norm, and at the riskiest end of this market where minimal equity exists for security lenders often charge in excess of 20% APR to cover the risks involved. Again, being a specialist in this area The Loan Helper can source a secured loan for even the most extreme financial circumstances a homeowner may find themselves in.

If you’re thinking about a secured loan, make sure you do your research thoroughly and that the APR you sign for is reasonable and affordable for your circumstances. Fortunately, you can rely on your friends at The Loan Helper, where you’ll receive specialist and expert guidance and help to choose a suitable deal from the hundreds of loans to which they have access from 16 of the UK’s best lenders.

The Myths…

Your home is at risk with a secured loan, but not with an unsecured loan. Whilst it is very true that if you fail to repay your secured loan your lender can use the charge on your home to force a sale and recover their money, any creditor can apply to the court and obtain a charge on your property if the loan becomes delinquent, and once the lender has that charge your debt to them is now secured against your property, so there is little real difference other than one additional process to obtain the charge.

The ‘quick-solution’ consolidation loan. Secured loans often tend to act as magnets for borrowers with pre-existing debt problems, who see a secured loan as an instant fix to all debt problems. Whilst a secured loan can be used as a viable and valuable tool to reorganise the finances of over-committed borrowers, it is not an instant fix in itself. Once you’ve taken out a consolidation loan, you’re still in debt and whilst the consolidation of other debts will likely have reduced your overall outgoings, you must ensure that you do not then take on further credit and build back up your outgoings once more. For example, if your consolidation loan has paid off your credit card or overdraft facility, DON’T then start building up your credit card balance or overdraft all over again! Otherwise there has been no point in the consolidation, which was done in the first place to reduce your outgoings, not to give you an opportunity to get even deeper into debt.

If you have any uncertainty over your resolve post-consolidation, then terminate your credit card agreement and overdraft facility lest you succumb to the temptation of using them and continuing the spiral into unmanageable debt.