It’s nice to have an overview of secured loans if you are thinking of taking one out. These loans are good for taking care of personal things that are threatening to stretch you too thin in the cash department. There are plenty of lenders out there, offering home equity loans with competitive interest rates. And the online business is fast overtaking the banks and credit unions.
A secured loan is one of the most popular forms of money borrowing today. When you say ‘secured loan’, it means that you have something of value to offset the amount of the loan if it goes into default. Collateral is the word for this. Whatever you put up as security, will become the property of the lender if you don’t manage to repay the loan. Things like cars and homes are put up as collateral for these loans all the time.
Lately the consumer lending has been a bit less than before. Borrowing is still up, but consumers seem to be holding it down a little bit more than in the past. They are keeping it under control. The bulk of this type of lending is done through home mortgage loans, but the home equity loans are strongly bringing up the rear. The difference between the two is this – a home mortgage loan is used for the purchase of a house, whereas the home equity loan, is money borrowed ‘against’ a house, as collateral.
There are a few reasons why secured loans are so popular. The risks for these loans may be high, but so are the benefits. Some of these benefits are:
(1). It’s much easier to get approved for these loans.
(2). The amount you are able to borrow can be a lot higher
(3). The interest rate you will get can be much lower
(4). The terms you get can be much better as well
The biggest drawback for these loans is in giving up your home if something happens to cause you to default on repayment. Your security will be taken to recover funds. The lender has legal right to sell your home and recover the value of the loan. Losing a home is quite a sacrifice, so a lot of deep thought should go into the decision to put it up against a loan.
There are a lot of safeguards in place to keep this from happening. The lender will have to go through the court system in order to take your home. And it’s the same with a car. Many people have lost their vehicles in a transaction like this. Always be as sure as you can about your ability to repay before entering into any kind of contract like this, because there can be long term consequences as well.
Regardless of whether you borrow on a secured basis or not, most any form of borrowing is going to include your credit rating. If you have a good credit history, then more doors will be open and available to you. If not, sometimes you have to make a deal you don’t necessarily like in order to do what you have to do. It helps if you can begin borrowing in small amounts and paying back in order to build your rating. This gives you a better shot a things on down the road.