Should You Get a Secured Loan on your Home?

The banks and building societies that we use to get access to finance today have changed the way that they consider people for loans. In some cases, you might find that it’s more difficult to get the credit that you need than you previously thought, because many building societies and banks are trying to reduce the amount of risk that they take on as much as possible. As regulations become stricter throughout the country, it can be more difficult for those who struggle at maintaining and managing their money to get their hands on the right financial help.

If you already own a home, then you could always increase your chances of getting finance by securing the loan that you receive against your property. Basically, the process of a secured loan works by allowing you to borrow money even if you have a poor credit rating or need to borrow a lot of money, because the bank or lender that’s giving you cash has something to fall back on if you fail to make the repayments promised.

Why Do People Appreciate Secured Loans?

One of the biggest benefits that comes with choosing a secured loan over a standard personal or unsecured loan, is that you’ll often have the opportunity to borrow more money off your lender. The reason for this is that the lender that’s giving you the cash isn’t taking on as much of a risk by handing you the money. Even if you fail to make the repayments that are expected of you, the bank will be able to recoup its losses by reclaiming your home. After all, when you agree to the terms of a secured loan, if you do not pay back the money that you owe, the bank or building society that gives you the money can repossess your property.

While secured loans can allow you to access more financial assistance, they also benefit from giving you longer terms to pay the money that you owe back. For a secured loan, it isn’t unusual to be given terms that can last for decades at a time. After all, consider your mortgage as an example. Most people would not be expected to give back the money that they owed within a couple of years, like they might be with an unsecured loan.

Although a longer term means that you’ll obviously pay more in interest over the years, it also ensures that your repayments will be lower too, which can make a big loan a lot more manageable.

When Might Secured Loans be a Bad Choice?

Though secured loans certainly have benefits to offer in the right circumstances, they also come with a specific range of negative issues and risks. The reason that you’ll be able to access a large amount of money for a longer period of time, is that you’re giving your bank or building society the security of knowing that they can take your home away from you if they need to sell it to make up your repayments. This means that if you and your family fell into financial hardships wherein you were unable to make the repayments required on your loan, you could find that you lose your property, and end up out on the streets.

Another thing to keep in mind is that the rates sometimes offered for interest on secured loans can be variable. This means that the rate of interest you end up paying could decrease and increase according to the criteria that is set in place by the current economic climate. Before you begin signing up for a loan, secured or otherwise, you should check to see what kind of rates you will need to be paying. After all, this is the only way you can make sure that you will be able to pay back the loan that you get in the first place.

What Could You Do Instead?

If a secured loan seems too dangerous or risky for you – as it sometimes does for some people, it may be worth considering alternative solutions instead. One option may be to increase the amount of the mortgage that you already have on your property. This way, you can access extra money, without having to spend a lot more on interest.

Some people even switch their mortgage over to another lender so that they can take out more money. For instance, you could take out a $200,000 mortgage on a home worth $180,000 so that you can use the extra money towards a car, or another purchase that you might need to make. Of course, the only problem here is that you’ll need to be sure that you can meet the lending criteria put in place by your new lender, and ensure you don’t have to pay extra for ending your other mortgage agreement early.

Creating your Own Loan Repayment Plan

One of the most important things for you to think about before you even consider taking out a loan, is how you plan to repay the money that you borrow. After all, when you access a loan, you’re not simply getting free money that you can use however you like, you need to make sure that you can pay back the amount that you borrowed in the first place, alongside the additional cost of the interest that has gathered over time as you continued to pay back the loan.

Taking the time to think carefully about your plan for loan repayment can help you to get a better idea of your ability to deal with the stress and complications of taking out a loan. Here, we’ll take a look at some of the ways that you can start planning a loan repayment solution.

What Has an Effect on Borrowing Costs

The amount that you actually have to repay when you borrow money in the form of a loan will depend on a range of crucial factors that exist at the beginning of the time that you choose to take out the loan. For instance, you will need to think about how quickly you can pay back the money that you have borrowed, and how much you actually want to borrow. If you only want to borrow small portions of money and repay that money fast, then you might not have to pay much interest. In fact, you could even benefit from using a 0% credit card or overdraft facility to give you the money that you need instead.

In some cases, the larger the amount of money you borrow, the less the interest you will be expected to pay back will be. Sometimes, this means that if you’re only slightly under a specific amount that could give you access to better interest rates, it might be a better idea to borrow more money and save more in the long-term. The best way to check how much you’re going to pay in terms of interest is to look at the APR when comparing loan products. The lower the APR is, the better the product is for your long-term interests.

The Costs of Taking out a Loan

Sometimes it’s simpler than you might think to figure out a good idea of how much you’re going to need to spend in order to take out a credit card or loan with the information provided by a lender. By law, you’ll need to find out the interest rate, fees or charges that are involved when you start considering the loan, as well as the APR. You will also be able to ask your lender how much you’ll need to pay each month.

Most of the time it’s easy enough to find the majority of the information that you need on the website of a loan company, and you should also be able to see it in the agreement that you signed before you were given the opportunity to take out the loan. Remember that you should check the fine print of all of these agreements before signing anything, as you want to make sure that you’re not going to be penalized should you decided to make extra payments on your loan ahead of time, or if you fail to make a payment on time one month because of some circumstances.

Flexible and Regular Payments

No matter what kind of loan you take out, you’ll find that you need to pay back a set amount each month. The loan that you take out may also charge early repayment fees if you decide that you want to clear the amount that you owe ahead of schedule. If you think that you might want to repay your loan early, it can help to look into the lender agreement and find out whether this will cost you any extra. After all, paying a loan off early can help to save you money in terms of the interest that you are expected to pay in the long run.

In some types of payment, you will not be required to give the lender the same amount of money every month. For some people this is a beneficial opportunity, particularly when they aren’t sure exactly how much money they’re going to earn in their career each month. For example, self employed people might prefer flexible loan terms. However, for others, flexible terms can be complicated as they can mean that it’s harder to keep track of exactly how much you owe. With regular payments, the amount you have to pay can simply be taken out of your bank account each month without any problems. However with flexible payments, you’ll have to arrange the payment yourself.

Taking out a Loan with your Partner: What you Should Know

When you’re taking out a loan by yourself, there are plenty of unique concerns to think about. For instance, you need to consider how much money you really need access to during the time that you’re taking out the loan. On top of that you’ll need to think carefully about which kinds of loan might be the most beneficial to your unique needs.

Of course, if you’re thinking of taking a loan out with someone else, that also presents a few specific issues that you’ll need to address too. Joint loans are pretty common in the UK today as more couples consider the opportunity to borrow money and pay it back as a team. There are various types of joint loans that you can use to make important decisions and changes in your life, from a joint loan on a mortgage, to taking out a loan together for a car.

The important thing to remember, as with any kind of loan, is that you need to carefully consider the dangers and risks that you face when you consider joint loans in the first place.

What Does Joint Liability Mean?

A lot of people assume that when they take out a joint loan with someone else they’ll only be responsible for their share of that loan. For instance, if you borrowed ten thousand pounds between you and your partner for a new car, you might think that your liability only extends to the five thousand that was given to you. However, the truth is that joint liability means whenever you sign a credit agreement for a joint loan, you’re agreeing to pay off the entire debt, whether the other person gives their share or not.

This means that no matter who spends the money that was borrowed, or who you think should be paying off the loan, the fact that you were involved in the process to begin with means that you won’t have a choice on paying back what is owed. Crucially, it doesn’t matter whether or not you and your partner were married at the time of taking out the loan, or whether you end up breaking up. This is a very dangerous issue that needs to be considered with care when you are thinking about the potential of joint loans. After all, if you took out an overdraft with a person and then broke up, that other person could run up some serious debt on your account that you are liable to pay for.

Are you More Likely to Get Credit with a Joint Loan

The answer to this question is a little complicated. After all, while some people will find that applying for a joint loan will end up giving them a better outcome than applying for credit separately, others will find that the chances of getting a loan decrease when they attempt to apply for finance with another person.

Usually, it’s a good idea to avoid applying for a joint loan if one person in the partnership has a bad credit rating. After all, once you have taken on a joint debt with another person, you will find that your credit file becomes connected to theirs. This means that if you want to apply for a loan at a later time in your own name the lender you go to will be able to see the credit history of the other person and examine it alongside your own.

Because of the problems that come with linking your credit history to someone with bad credit, it’s crucial to think about how financial connections with your partner could impact the possibility that you will be able to apply for finance in the future. Particularly if you are concerned that you might not be with your partner forever. Sometimes, it’s crucial to look closely at the credit ratings of both you and your partner before you even start considering the possibility of a joint loan so you can determine how good your chances would be.

Of course, a joint loan isn’t always a bad thing. Sometimes you might be able to get better deals and interest rates on things like mortgages if you want to apply for your finance solution through a joint account. Other times, it will simply be much easier and more financially viable to apply for the money that you need in your name, without any connection to your partner at all. Remember, even if you apply for a joint loan separately to your partner in order to pay for a mortgage or a car, that doesn’t mean that both of you still can’t use the item that is purchased together. It simply means that you will be taking on the liability of the loan yourself.