If you need cash and you need a large amount, turning to secured loans may be the best option to check into. Secured loan deals are widely available across UK catering to borrowers who need cash for a number of personal reasons. From minor to major financial emergencies, home renovation or home purchase, vacation or business investment, you can rely on secured loans to meet your needs fast and efficiently. But first let’s try to fully understand how secured loans work and here’s a smart guide to help you do just that.
What are secured loans?
Secured loans are loans that require collateral. Collateral can come in different forms including a personal asset like a house or home equity and vehicle as well as bank savings accounts, bonds and more. The type of collateral you can use will depend on what’s acceptable with your lender. As long as you have collateral and you can provide proof of employment, you easily avail a secured loan. You’ll also need to make sure you have good credit in most cases to be eligible for this type of loan.
Who are secured loans for?
Secured loans are for people who are of legal age and a UK resident. To avail a secured loan, you must own collateral you are willing to secure the loan against. Other key requirements include the borrower to be fully employed with proof of sufficient income. You must be able to provide your recent pay slips showing how much income you’re making in a month. If your lender can prove that you are in a financial position to repay the loan, chances are high that your secured loan will be approved fast.
How much can you borrow with secured loans?
Because of the involvement of collateral, borrowers are able to borrow larger loan amounts with secured loans. With secured loans, you can typically borrower from about £1,000 up to £150,000 or more payable in 1 year up to 25 years or longer. The maximum amount you can borrow will depend on your collateral’s value and your income. It will also depend on your credit score. In most cases, borrowers must have good credit to get approved for a secured loan.
How secured loans work?
Secured loans as mentioned are loans that require collateral. To get approved for this type of loan deal, you need to agree to the loan terms and conditions, which include collateral repossession. Whether you’re using your home or vehicle as collateral, signing the debt agreement means that you agree to the possibility of repossession.
Repossession happens when you are unable to repay your loan for several months. In general, your lender will give you a grace period to update your payments. After this period and you still haven’t paid your loan, the next step for your lender is to recover your property or asset as per the loan terms. In this sense, secured loans are riskier than unsecured loans but it’s also why you can borrow more money with this type of loan.
Should you apply for a secured loan?
Secured loans can be advantageous in many ways but the high risks involved is a main consideration when turning to this loan type for your financial needs. Repossession is one risk to take into consideration. Cost and the lengthy loan terms are two other factors to keep in mind. If you have a good credit score and you know you can afford the loan repayments, it makes sense to go ahead with the loan. Like with any type of borrowing, the most important factor is really about repaying the loan on time to avoid incurring high interests and losing your asset.