 Is a secured loan an effective way to consolidation of debt?
Most of us know how stressful it can be to have to juggle a range of debts, as this means a range of monthly repayments to a variety of creditors, which can get confusing and frustrating. Having so many creditor and debts to deal with comes with a range of problems.
Firstly, you end up paying high levels of interest to many different creditors, especially if you have debts such as credit cards and store cards, which usually have very high interest rates.
Another problem that comes with having to deal with a large number of debts is that financial management can get confusing and difficult, and this can lead to you missing repayments and making regular late repayments.
This can have a knock on effect in that it can seriously damage your credit history and rating, which can then make your financial future increasingly difficult.
Finally, you may find that having to make repayments on many high interest debts means that your monthly outgoings are sky high, which could leave you with little or no disposable income each month.
There are some solutions available to those that want to rid themselves of the hassles of high debt repayments and a whole bunch of creditors to deal with, and one of the most effective solutions is a debt consolidation loan, which is a loan that can be used to repay all of your smaller debts.
Consolidation loans are available on either a secured or an unsecured basis, but if you have a high level of debt you may find that the unsecured consolidation loan may not prove effective. This is because the borrowing power with unsecured loans is far lower than with secured loans, which means that you may not be able to borrow enough to repay all of your existing debts.
In addition to this the repayments periods are usually much shorter, which means that your monthly repayments will be higher and you may not really make much of a saving on your monthly outgoings. You will also need good credit to qualify for an unsecured consolidation loan.
For those with poor credit or those with very high levels of debt one of the most effective solutions is to opt for a secured consolidation loan. These loans are available to homeowners with a certain level of equity in their properties, and can make a real different to your debt problems.
A secured consolidation loan is secured against the equity in your home, and this means that before you make any commitment you must ensure that you can comfortably afford the repayments, as otherwise you could risk losing your home.
Also, another risk to consider is that you could fall into negative equity if house prices fall and you have borrowed against the full amount of your equity. It is therefore advisable to borrow up to a percentage of your equity giving leeway for house prices to fall without putting you into negative equity right away.
When you take out a secured consolidation loan you will have to meet the lender’s eligibility criteria in terms of financial and employment status, equity levels, income and outgoings, credit rating, etc.
You will find that there are a number of lenders that offer secured loans, and it is therefore important that you compare different deals from different lenders in order to get the most competitive consolidation loan package for your needs.
Interest rates, terms, and repayments periods can vary from lender to lender, and by comparing these areas you can ensure that you get the best loan for your needs and your pocket.
Once you have found the right secured consolidation loan and have been accepted you can get all of your existing smaller debts paid off through your new loan, effectively closing all of your existing credit card, store card, loan, etc. accounts.
You will then need to start making monthly repayments on your new consolidation loan. However, if you find a low rate, good value consolidation loan you will find that the competitive interest rates and longer repayment periods could mean that your monthly repayment is far lower than on your previous debts.
Also, bear in mind that based on your equity levels you can usually enjoy far greater borrowing power with a secured consolidation loan, and this means that you can cover all of your existing smaller debts, so that there are no debts left straggling behind because you cannot borrow enough money to pay them all off. Once you have done this you will find that financial management is far easier and your debt repayment is far more affordable.
 Is it worth using my home to get a loan?
Being a homeowner offers many benefits – as a homeowner you have a valuable investment for the future of you and your loved ones, a roof over your head, and an important asset that will give you increased financial leverage.
Many homeowners decide to use their homes in order to raise finances for one of a range of purposes, and this method of borrowing money has become increasingly popular over recent years, as house prices have soared and homeowners have found themselves with huge levels of equity in their homes.
Homeowner loans, also known as secured loans, are loans that are available to homeowners and are secured against the home. You will usually need to have some level of equity in your home in order to get a homeowner loan, although this will depend on the lender, as some offer loans to those with little or no equity.
However, if you take out a homeowner loan and you have little or no equity you increase the risk of falling into negative equity, where you owe more on the home than the property is actually worth.
It is important that you do take into consideration the risks before you commit to a loan that is secured against your home.
Whilst homeowner loans do offer a range of benefits to borrowers they are not without their risks, and in order to determine whether you should use your home to get a loan you need to consider both the risks and the other available options that are open to you in order to reach an informed decision.
For example, you may find that a homeowner loan is the only option available to you – for example, if you have poor credit and cannot get an unsecured loan.
One of the major risks of a homeowner loan is the risk of losing your home altogether in the event that you default on repayments on your loan.
It is therefore vital that you consider this route of borrowing carefully, and that you make sure that you can comfortably afford repayments before you commit, otherwise you could end up losing your property.
The other main risk, as already mentioned, is the risk of falling into negative equity, where your property is worth less than the amount that you owe on it, which can happen if you borrow with little or no equity or if house prices fall.
If you have plenty of equity in your home, you work out your finances to ensure that you can comfortably meet the repayments without overstretching your finances, and you do not finance your home to the hilt, you may find that using your home to get finance is a good way to get an affordable loan.
With a homeowner loan you can enjoy greater borrowing power based on your equity levels as well as longer repayment periods, which means that you can keep monthly repayments down.
However, if you have little or no equity, or if your finances are already tight, then it may be best to avoid securing finance against your home, as you will be at increased risk of struggling with repayments and losing your home, or of falling into negative equity.
In order to increase affordability, if you do decide to opt for a homeowner loan, you also need to ensure that you shop around to find the best deal, as otherwise you could end up paying way over the odds on your loan, which could again increase the risk of defaults and loss of your home.
When you are comparing homeowner loans, which you can easily do online, you should make sure that you get a number of quotes.
Check the interest rates charged on the loan, as well as the repayment periods offered, any set up fees, and other terms and conditions.
By comparing all of this information you will get a better idea of whether you can afford to take out this type of loan, and what the risks might be.
Remember, if you have bad credit you will be charged a higher rate of interest on your homeowner loan, and again this can increase the risk of defaulting on repayments if making the repayments becomes a struggle.
Whatever the case, it is important that you carefully consider whether you really need the loan, and if so whether a secured loan is the best option rather than an unsecured loan, credit card, or other form of finance that will not put your home at risk.
Try our loan repayment calculator | One in ten in the dark about debt
In the UK we're in the dark about our finances, according to new research. The survey reveals that despite 96% of us claiming to be familiar with our current finances, when questioned many of us don't have a clear picture of our credit commitments.
The research also shows that just 26% of us can accurately state how much remains to be paid on our loans, while 20% admit to only planning finances once every six months or less.
Meanwhile, 10% of us admit to having no idea about how much debt we are in.
As well as being unaware of what's going on in our credit accounts, a large number of us are also unclear about the APR (annual percentage rate) we're being charged on credit cards, loans and overdrafts.
Whilst most of us know our overdraft limit, the study showed that 36% of the population are unsure what APR is. The lack of APR awareness is even more marked when it comes to credit cards, with 48% of the nation unable to recall the APR on the cards they hold.
The Great British public aren't confident when it comes to applying for loans either. 23% expect to be refused a loan of £1,000, 42% don't believe they could secure a loan of £10,000 and 66% think that they would be refused a loan of £30,000.
A personal loan is between a.. more
How to survive the credit crunch ... more
Secured loans - Why you should consider ....... more
How secured loans can prove beneficial In the past many people were afraid to touch secured loans, with fears that this sort of loan would plunge them into negative equity or result in them losing their home. However, over recent years this type of finance has become increasingly popular, with a rising number of homeowner realising that this could actually be the most sensible and affordable way to borrow money.
The massive rise in equity levels for most homeowners over recent years has meant that homeowner across the UK now have increased financial leverage when it comes to taking out finance, and this is something that many homeowners have taken advantage of.
Basically, a secured loan allows the homeowner to unlock the cash that is tied up in the value of the home without having to sell up and move on first.
These secured loans offer a number of benefits that do not come with unsecured finance, and this is what sways so many homeowners to opt for this type of loan.
One of the main attractions of the secured loan is that the borrowing power is so much greater than with an unsecured loan. With unsecured loans the maximum you can borrow is usually £25,000, and this depends on your financial status, credit, income, and various other factors.
However, the amount that you can borrow with a secured loan is way higher, but does depend on a variety of factors including your equity levels.
If you want to work out your equity levels in order to look into taking out a secured loan the first thing to do is get your property valued.
If you are using an estate agent to get a value on your home make sure that you contact around two or three local estate agents so that you get a better idea of the true value of the property – if you only contact one there is a danger that the estate agent will either undervalue the home thinking it will lead to a quicker sale or overvalue it to increase the commission that the estate agency gets should you sell it.
You will also need to contact your mortgage lender in order to get an accurate balance on your mortgage, as well as contacting any lenders that you have secured loans with already if applicable.
All you will need to do once you have all of this information is deduct the amounts that you owe on your home from the amount that the property is worth, and you will be left with the equity. You can then use this to make enquiries with lenders, and to help determine how much you may be eligible to borrow.
Another of the attractions of secured loans is that they offer far longer repayment periods than unsecured loans, and this can help borrowers to keep down their outgoings. You will be able to spread your loan over a longer term, and this means that you can reduce the amount you have to pay out each month.
If you have bad credit then the likelihood of getting an unsecured is slim to none, but if you are also a homeowner then there is a far better chance that you will be able to get finance in the form of a secured loan.
With secured loans the amount that you will be able to borrow will partly depend on your equity levels, but the lending practices of each individual lender can vary. You may find that some lenders will only allow you to borrow up to a certain percentage of your equity, and this is a good safeguard against falling into negative equity as you will not have financed your home to the hilt.
Some lenders will allow you to borrow up to the full amount of your equity, and there are also lenders that will allow you to borrow more than your equity. You will need to compare loans and lenders in order to determine which loan is best suited to you.
You will find some very competitive rates available on secured loans, but you do need to do your research first, as this will enable you to pick up on the best deals by comparing different secured loans from different lenders.
You can compare with ease and convenience simply by going online, where you will find a vast array of lenders offering secured loans for homeowners.
Alternatively you can use a broker service, where the broker can use established links with a wide range of lenders to determine which lender and loan is going to best suit your needs.
You can use secured loans for all sorts of purposes, and one of the popular uses for these loans is to carry out home improvements such as extensions, conversions, and more.
This can actually further increase the value of your home and could enable you to recoup some or all of the value of the loan through increasing the value of your home by that amount.
------------------------------------------------------------------------------------------------------------------------------------ Mortgage approvals at all-time low Mortgage approvals for house purchases slumped to a record low in April, the Bank of England has said.
In total there were 58,000 mortgages approved for house purchase – a key signal the property market is slowing – worth £8.3 billion.
This compares with 73,000 mortgage approvals in January and 115,000 in May 2007.
However, remortgage approvals rose 8,000 from March to 106,000 – but was still below the 118,000 recorded in January.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics), said: "The latest weak data on mortgage approvals highlight the continuing problems facing borrowers trying to secure finance to purchase property.
"Lenders are continuing to tighten up on the conditions accompanying new loans making it hard for first-time buyers to take advantage of the modest fall in house prices seen over the part few months."
He added the weak data highlighted "very clearly the real problem facing not just the property market but also the wider economy.
"A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancillary industries."
Mr Rubinsohn added the Bank of England may be forced to cut interest rates to buoy the property market if the conditions do not improve.
The Bank of England data also reveal a slowdown in personal loan and credit card lending.
Consumer borrowing was limited to £0.9 billion in April, down from £1.2 billion in March.
Howard Archer, chief UK economist at Global Insight, said: "Going forward, consumer borrowing will be limited by tight lending conditions, while many people are likely to be increasingly keen to rein in their borrowing.
"Rising debt levels, low household savings rates and lower equity prices mean that there is a pressing need for many consumers to improve their finances."
He added: "There is also likely to be higher distressed borrowing over the coming months, as people struggle in the face of higher food prices and utility bills, as well as increased mortgage payments.
| Quick Homeowner Loan We are part of the Lothian Finance Ltd group of companies who have been arranging loans for homeowners since 1994. Lothian Finance offer this service to people in the UK who have a mortgage on their home and are looking to use some of the money tied up in the equity for other reasons such as home improvements, debt consolidation, buying a newer car, taking a dream holiday, paying for a wedding, or even paying for school fees. Lothian Finance have various websites that offer secured loans to homeowners. They offer a free loan quote service without any obligation. If you click on the apply now at the top of this page you will be taken to the short loan enquiry form. Take two minutes to complete the form with your personal details and allow us the opportunity to search through our list of the best secured loans currently on offer to see what loan options are available to you.
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