Secured Loan – What Does It Mean?
When you avail a loan offering collateral, that loan is known as a secured loan. In this loan, the lender is safe; he safeguards against any risk in the event of non-repayment of the loan. In the event of non-repayment, he will have the liberty to dispose of the security you have offered as collateral. The proceeds realized from the disposal of the property, he will adjust whatever amount is due to him towards the loan and return the balance amount, if any, to you. In case the realized amount falls short of the amount due, he will claim it from you. Thus his interests relating to the loan dues are fully protected and he does not lose even a single penny.
Distinct Advantages In Secured Loans
As far as a secured loan is concerned, there are quite a few advantages. Among them, the most distinct advantage is you can avail a loan for a substantial amount. And as for the use of the loan amount, there will be no questions as to how you are going to use the amount. You may do anything you like. If you feel it necessary, you can attend to repair works for your house or buying new furniture or you may even consolidate your existing debts. You can avail this loan even if you do not have good credit. yahoo finance Lenders are quite liberal in respect of these secured loans because of the fact that there is security to fall back!
Qualifications To Get These Loans?
When you offer a property as security, it is not insisted that you should be the owner of the property. If you have considerable equity in it, it is enough. Even if the property is under mortgage, it will not matter; you can still get this loan. The security factor helps you in getting not only a big amount as loan, but also in getting competitive repayment terms as well as reasonable rates of interest. When you have decided to avail a secured loan, you should make it a point to have detailed discussion with the lender and ensure that the interest rates and repayment terms are satisfactory and are within your limits.
How is The Interest Rate Decided?
Generally, the lenders decide on the rate of interest on the basis of a few things. What is the loan amount? What are the terms of repayment? The value of the property offered as security and the amount of loan required and the credit history of the borrower. When you discuss the matter with the lender, you should find out whether he could offer a ‘payment protection plan.’ This plan is very useful because it helps both the borrower and the lender. This plan comes to your rescue in the event of your falling sick or meeting with an accident. The lender also gets protection; he will get his payment. There are different types of this plan. If you ask the lender, he will give you full details.
The Twin Benefits In A Secured Loan
What are the twin benefits? Firstly, you can avail a loan for a big amount and, secondly the payments you have to make every month could be lower. Since there is security, lenders are inclined to give a big loan and, sometimes, they are even prepared to give a loan for more than the current market value of the property offered as security. This aspect will very much depend on the term you want and your credit history. There is, however, one condition. You should have been the owner of the house – if it is offered as security – for some length of time. To get this loan, there is no distinction – you may be employed or self-employed or even be a pensioner.