Homeowner Loans

Homeowner loans are a type of secured loan available to people who own their own homes. As the name suggests, these loans are secured against your property, so if you default on the loan, lenders could repossess your home.

However, homeowner loans can offer several benefits, including lower interest rates and longer repayment terms.

Debt Consolidation Loan

One of the most popular forms of a secured loan, debt consolidation arrangements enable you to merge your outstanding credit into one monthly payment. Doing this means you’ll spend less each month and can get your finances back on track.

Bridging Loans

Bridging loans basically ‘bridge’ the gap between two financial transactions. For example, if you are buying a property before selling your current home, you can use a bridging loan to cover the deposit cost.

Bridging loans are typically secured against property and are therefore only available to those with equity in their home. They can be an expensive form of finance, with high-interest rates and fees, so it is essential to consider all other options before taking out a bridging loan.

However, for those needing quick access to finance, a bridging loan can be an effective way to ‘bridge’ the gap.

The difference between secured and unsecured loans

As the name suggests, an unsecured loan doesn’t require any collateral, so you can enter into it without owning a home or other valuable assets. While some people think this is the better solution, unsecured loans have some disadvantages.

Let’s take a look at the pros and cons of each.

Secured loan pros

Secured loans require some collateral, but if you’re a homeowner, these agreements can be worth it.

Low-interest rates

Most secured loans have low-interest rate agreements, which is beneficial if you don’t want to deal with crippling payments. The main reason for this is the extra security you offer as collateral.

Longer period of repayments

As secured loans use assets, you can look forward to longer repayment terms. Some of these agreements can last for years, which is different to unsecured loans that usually have a maximum period of five years.

Easier to get

As you can show that you have an asset to offer as security, a secured loan is easier to get. Most providers will look at your financial circumstances, but having less than excellent credit doesn’t necessarily mean you’ll be turned down.

Secured loan cons

As with everything, there are some disadvantages associated with secured loans. While these cons shouldn’t put you off, you need to consider them before deciding.

The loan-to-value ratio

Just because you own a house worth £280,000 doesn’t automatically mean that you’ll receive that amount through your loan. Lenders use a loan-to-value ratio to determine the amount you can borrow, depending on how much equity you own.

For example, if your home is worth £280,000, but your mortgage accounts for £200,000, you could only borrow £80,000 at the most.

You could lose your security

Owning a property gives people security, especially with skyrocketing rents. If you fail to meet your monthly repayments, losing your property is a real threat.

Unsecured loan pros

In many ways, an unsecured loan is the riskier option, but it might be the only borrowing solution for some people.

You don’t need any collateral

Secured loans require collateral, but unsecured loans do not. Unsecured loans don’t rule you out automatically if you don’t own a property or have valuable assets.

They’re suitable for short-term borrowing

Many people might want to borrow some money but not be locked in for years. In theory, if you have the finances, you can pay it back within 12 months or up to five years, which is more convenient.

Unsecured loan cons

It’s no secret that unsecured loans come with some significant disadvantages, so before you jump into an agreement, it’s essential to understand them.

You can’t get a loan with bad credit

As you’re not offering any collateral, most providers won’t give you a loan if you have poor credit. In some cases, you might struggle to find a secured loan provider that accepts you with fair or good credit, so while these loans can be handy, they’re notoriously tricky.

The interest rates are poorer than secured loan rates

Many unsecured loans come with high-interest rates, so they’re not ideal for many people. While you can find decent interest rates with an excellent credit score, a personal loan will cost more.

Lower limits

Unsecured loans are ideal if you only want to borrow a small sum, but secured loans can be more than £100,000. So, if you’re planning on financing a new property or business deal, you probably won’t find an unsecured loan.

Look at interest rates

Loan providers offer a range of interest rates, so some secured loans cost more than others in the long run. In the best-case scenario, you could secure an interest agreement of 2%, but some others might be up to 10%.

However, some people find themselves in a situation where they have to pay more interest, but it entirely depends on their credit score and available collateral.

There are also different agreements between separate lenders:

Fixed-rates

Fixed-rate interest means you pay a set amount for a period of time, then move on to a standard variable rate, which might make the payments higher. Some lenders also offer a short-term interest agreement, lasting between one to five years, depending on the contract.

Variable rates

Variable interest depends on the Bank of England base rates so they can go up or down. If the rates go down, that’s great, but higher rates can cost more.

Find out about early repayment fees

If your finances improve, you’ll probably want to free yourself of debt instead of continuing with the monthly payments. Most secured lenders will allow people to pay off the amount early, which can result in fees.

It’s important to check the lender fee first before making a decision.

Working with people from all backgrounds

Self-employed individuals can often find it more challenging to secure a loan, but our advisors are fully trained professionals that work with people from all backgrounds. Many lenders will offer to self-employed people, but getting a foot in the door can be hard.

With us on your side, you’re already halfway in and ready to compare secured loans from specialist providers.

Supportive customer service team

Finding the right loan can be difficult, but our service is designed to be hassle-free. We’re not a lender, so you can rest assured that our advice is impartial.

Once we find the right secured loan, we’ll add our fees to the outstanding amount, so you’ll have zero upfront charges. Then, you can enjoy using your money for its intended purpose and make your monthly payments.