There are times when you require a higher loan amount for meeting your needs. In such cases, a secured loan option would be a viable loan type for you to take. A secured loan necessitates the presence of collateral. Since, you can borrow a larger loan amount with this loan type, you can fulfil most of needs easily. So, this loan type can also be said as
any purpose loans.
If you are a homeowner in the UK, then you can easily seek a loan by putting your property as collateral. Homeowners can borrow a loan amount up to 90 percent of the equity present in your home. But, some lenders may even offer you an amount as high as 125 percent of the equity.
In case of
any purpose loans or secured loans, the lender goes for the valuation of the property and finds out the worth of your home. Then only he can offer you a loan amount according to the estimated value after the valuation of your home. The higher the value of your home, higher would be the loan amount you can borrow.
But, if the borrower doesn’t repay the loan amount within stipulated repayment term, the lender may repossess your home. Many borrowers take PPI (Payment Protection Insurance) in order to guard oneself against unexpected circumstances, such as illness or unemployment. So, it is advisable to take PPIs as this may mitigate the risk which you may have during the loan repayment tenure.
The best benefit with a secured loan is that you can get a loan at lower APR (Annual percentage rates). The stiff competition among the private lenders may help you in availing cheap secured loans or
any purpose loans. Apart from this, longer repayment terms are given for the repaying the loan amount. These flexibilities are offered because the lenders have a lower risk associated with this loan type.
Generally, the lenders offer a variable APR with this
secured loan option because the repayment term is longer in this case. The APR can go up and down during the tenure of the loan, only if it is mentioned in the loan agreement. If the lender states in the loan agreement that the interest rates may vary according to the base rates by the Bank of England or with any other base lending rate, then only the interest rates may vary during the loan tenure. So, it is advisable to read the loan agreement carefully while taking a loan.
By: Gracy Jain