Why do people choose secured loans

 

Loans secured against assets are a popular choice for people who may find it difficult to obtain other types of products or for those who want access to larger amounts of money or longer repayment periods.

They usually offer better rates than unsecured loans but do require people to have assets, such as their home, to secure the loan on. This is why they are sometimes called homeowner loans, although they can sometimes be available to people with other assets, such as a car.

They are often used by those looking to borrow more than £15,000, although there are exceptions and it is possible to borrow less than £2,000 in some cases. The loans are generally repaid over periods of between five and 25 years, although this will depend on the amount borrowed and the original agreement with the lender, an example of such a lender being Evolution Money.

The fact that this type of loan is secured against assets means that lenders are more likely to offer them to people with a less than perfect credit history. The security allows them to lend in the knowledge that they can recoup their losses if the borrower were to default on their repayments.

Self-employed loans are another popular version of this type of loan. This is because self-employed people can sometimes struggle to obtain non-secured versions. These people, however, will usually have to prove their income over at least the previous six months in order to qualify for a loan.

These loans can offer a wider choice of benefits for those with the assets to use as security. This can be important for people looking for a longer repayment term or better interest rates or who want to borrow a large amount.

The amount that can be borrowed, the length of the term and the interest rate offered will usually depend on a range of factors, however, including a person’s circumstances, their history and the equity in their property or other asset. Many unsecured loans are based largely on the results of credit checks, but decisions on secured versions are much more likely to be based on the evaluation of circumstances that go much further than an individual’s credit history. They are also available to those people who have negative equity in their home, making them a much more achievable option for a wide range of people.

They can offer a much more affordable option compared to payday loans and store cards, for example, as the interest rates on offer are likely to be significantly better. They can also be used for a wide range of reasons.

One of the common reasons people choose to take out this type of loan is to fund improvements to their property. This could be as a result of the need for essential maintenance or because they want to build an extension, convert an attic or decorate. This sort of project can often add value to the property, meaning that taking out a secured loan has the ability to also offer financial benefits in the long term as well as providing the money to get a project started in the first place.

These loans can open up a wide range of opportunities for people, ranging from solving cash-flow problems to funding an expensive purchase, but they do need to be used responsibly. Their whole existence depends on them being secured on a person’s assets, usually their home, which means that they could lose the roof over their heads if they were to default on the repayments. This must be a serious consideration at the outset, as an extension or newly decorated rooms, for example, will be of very little benefit if they end up being enjoyed by someone else.