Secured Loans - Pros & Cons

By: bernard john

It is a known fact that for people who are capable and willing to pledge collateral - homeowners and property owners - secured loans is the best option, as it ensures maximum loan benefits. As a result, more and more people are opting for secured credit even for small monetary requirements.

The cons of availing secured loans are:

Credit for few: Secured loans can only be availed by those who are capable and willing to pledge collateral against the loan amount, i.e., homeowners and property owners. Others miss out on the advantages of secured deals.

Slow procedure and additional formalities: The lengthy property evaluation procedure makes the overall loan approval process very slow and adds to the paperwork.

Collateral repossession: When a borrower defaults to payback repeatedly or does not payback at all then the lender can seize the pledged collateral to recover his money.

Please note: Borrowers can easily do away with the risk factors by honouring the contract, i.e., by paying their EMI's (Equal Monthly Instalments = Principle + Interest) regularly.

Secured loans may sound risky for the borrowers. But, they are very advantageous too... The presence of collateral makes them the most profitable transactions for all parties involved. To the lenders it guarantees repayment, giving them the confidence to part with their money, whereas, to the borrowers it guarantees maximum loan benefits, giving them the incentive to risk their valuable asset.

The pros of availing secured loans are:
Quick attention: Lenders prefer secured deals because their investment remains protected. Also, as the borrowers share the risks, they are more likely to honour the contract.

High credit range and low APR: are suitable for big monetary requirements, as most lenders offer credit up to ?250,000 (subject to available equity) and interest rate as low as 6.7% .

Multiple rate plans and repayment methods: As the repayment term is usually long, borrowers can choose the most favourable rate plan (fixed/variable/discounted/capped) and payback method (capital/interest/partly interest and partly capital).

Negotiable loan clauses: As lenders are usually open to discussions, borrowers can negotiate for flexible loan terms and conditions like deferred payment up to 6 months, repayment holiday and accelerated repayment.

Please note: To avail the benefits of secured loans, the applicant must be a UK homeowner or property owner and over 18 years of age. Also, the approval of the loan amount is subject to the lender's credit policy, and in proportion to the borrower's credit history, debt to income ratio (DTI = Debts/Income), employment status and the value of the pledged collateral.

Secured Loans
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