Cheap Secured Loans For Home Owners

Having spent years striving to pay off my mortgage, the last thing I wanted to do was borrow more money against my home. But when I needed a short term loan, my property seemed to be all anyone was interested in. There was no doubt it was my chief asset and banks seemed to be willing to lend me vast amounts of money against it. Of course I did my research first, and I listened carefully to all the advice that was offered, but ultimately it seemed that home owner loans were by far the easiest to arrange.

I looked into the possibility of unsecured loans first. These are usually personal loans from a bank or building society and are not automatically linked to the home, making them accessible to non-homeowners. However in the current economic climate, I found that many lenders looked for a charging order on property, which essentially gave them the same rights as lenders of secured loans i.e. if payments were not met, they could demand their money from the sale of the home.

Unsecured loans have much shorter repayment terms than secured loans - usually a maximum of seven years; whereas secured loans allow much longer. In fact because of the costs of setting up secured loans for lenders, they actually prefer these to be long-term - anything up to twenty years. Longer repayment times mean smaller monthly payments, but they also mean considerably more in total interest charged.

When you are borrowing a large sum of money over a long term, it is easy to be tempted into taking out more than you absolutely need. My wife thought that an extra 3000 for a decent family holiday would make very little difference in the long term, but thanks to the research I had been doing, I was able to set her straight on this. There would be time enough for holidays once we were completely debt-free and the less we borrowed, the sooner that would be.

There is another important difference between unsecured and secured loans. Because unsecured loans have a shorter repayment span, there is a fixed rate of interest on them for their duration. However the interest on secured loans is often variable and can go up or down according to the base rate and the terms of the lender, making them a variable rate debt. What might sound like an attractive rate today may not be so attractive in five or ten years time.

I would like to have had the option to pay the loan off sooner, should our personal circumstances change, but I was advised that this would not be possible. This is because redemption penalties are included in the terms of secured loans. These prevent you from paying off your debt earlier and, in trying to do so, you could incur a fine. It was useful to know this and again ensured that we only borrowed exactly what we needed.

One interesting fact I learned was the importance of a good credit score and how to achieve this. Having a good credit rating makes taking out unsecured or secured loans so much easier. Simple things like keeping up regular payments on credit cards and not leaving small debts behind when you leave an address can all help your credit score significantly.

Taking out a loan should never be considered an easy option. It is a serious matter and should be given a good deal of thought. There are debt counsellors available who offer free personal advice and information about the best way forward if you find yourself struggling with debt. There are also excellent internet advice sites and it is always worthwhile doing your homework and checking out all avenues before embarking on a loan that could put your home at risk.