Published on August 25th, 2013 | by Pete0
Secured Loan FAQs: Answers to Common Questions About Secured Loans
Secured loans can be used for a whole range of purposes, including to buy a new vehicle, pay for home improvements and consolidate your debts. While unsecured loans are currently difficult to obtain, especially if you have a poor credit score, secured loans are more readily available. Lenders are more inclined to accept an application for a secured loan, rather than an unsecured loan, as there is less risk to the lender. Here are some common questions about secured loans.
Will I qualify for a secured loan?
In order to qualify for a secured loan, you must own your own home.Most lenders will only provide loans to people over 18 years of age and in full time employment. Some loan providers have additional age restrictions and extra rules, such as a minimum income threshold, so you will need to check with your chosen lender before applying.
What if I have a bad credit score?
Secured loans can be easier to obtain than unsecured loans and many other types of credit, as you are providing an asset to secure the loan. Secured loans are available to suit a range of financial circumstances, including those with a poor credit history. If you are worried that your credit score could affect your loan application, check out the Creditlink secured loans website to see if they can help.
How much can I borrow?
As you need to provide collateral to guarantee your loan repayments, loan providers are likely to offer a much larger loan than you would be able to obtain on an unsecured basis. However, the amount you can borrow will depend on the value of your home as compared to the loan you are seeking.
How much will it cost to repay the loan?
The total cost of repaying your loan will depend on several factors, including the amount borrowed, interest rates and the length of your repayment period. You can use an online loan calculator to find out how much your loan will cost to repay.
Can I repay the loan early?
Secured loans tend to be less flexible than other types of loan, which means that early repayment may not be as straightforward as paying off the remainder. If you want to pay off your residential home loan early, most lenders require that you give them a 30 day written notice. You will most likely be charged around one month’s interest when you redeem.
What happens if I can’t repay the loan?
If you fall behind with your loan repayments, you could lose your home, property or possessions. Initially, if you run into difficulties with making repayments, you may be able to negotiate a deal with your loan provider. However, persistent non-payment of your loan could lead to your lender repossessing your home or taking other legal action to secure payment from you.
If you are considering applying for a secured loan, be sure to read the terms and conditions carefully before signing any agreement. Defaulting on payments could lead to the loss of your home, so always double-check that you can afford to make the repayments.
Ceri Harris has extensive experience as a personal finance consultant. Her articles mainly appear on money saving blogs where she enjoys sharing her tips.