Secured Loans - an Overview

By: Angelo Drew

Secured loans are loans against collateral, i.e., they can only be availed by offering something valuable - as security - against the loan amount. Hence, to avail the benefits of secured credit, the applicant must be:

  • A UK homeowner or property owner
  • Over 18 years of age
  • Willing to offer an asset as collateral against the loan amount

    Please note: The approval of the loan amount is subject to the lender's credit policy, and the borrower's credit history, employment status, debt to income ratio (DTI = Debts/Income) and the value of the pledged collateral.
    Presence of collateral makes a secured deal the most cost-effective transaction for all parties involved. For the lender, it guarantees repayment even in the event of repeated defaults or non-payment, as the lender can take over the pledged collateral to recover his investment.
    For the borrower it guarantees benefits like quick attention, high credit range (as high as 250,000) and low APR (as low as 6.7%) - subject to available equity. The borrower can choose from a variety of rate plans (fixed, variable, discounted, capped or variable) and diverse repayment methods (capital, interest or partly interest and partly capital).

    In a secured deal, the lenders are usually open to discussions. Hence, the borrower can negotiate for flexible loan terms and conditions like deferred payment up to 6 months, repayment holiday and accelerated repayment.

    Please note: Though Secured loans offer maximum benefits, loan seekers must asses the practicality and feasibility of getting into property related legalities and risking their property for the required amount.
    When it comes to shortcomings, secured credit is like any other credit alternative. Its clientele limitation, i.e., credit for homeowners and property owners only makes it more or less a homeowner loan. Other drawbacks are slow approval procedure (due to property evaluation procedure) and collateral seizure threat (in case the borrower fails to payback).

    Secured Loans
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