Secured Loans - Supersede your Financial Problems

By: Caitlin Lucy

Take the case of Mr & Mrs Johnson. They had purchased a property that was in need of renovation. They used their credit cards and personal loans to carry out the much-needed overhaul of the house. But, soon found themselves under a great deal of financial distress. The couple approached a finance company, and they were able to get a secured loan for ?35,000. With this consolidated amount, Mr & Mrs Johnson paid off some measure of their credit card and loan debts. Thus the monthly payment, which they had to make was halved.

Homeowners generally raise funds by going for Secured loans, by pledging their homes in order to raise funds

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as security for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus taken against the security. In the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to satisfy the debt by regaining the amount originally lent to the borrower.

How much can a borrower seek? The maximum borrowing on a secured loan is based upon your credit score and an affordability calculation. As traditional income multiples are not used, you can usually borrow more than you might think. There are a number of advantages in seeking a secured loan. Secured loans are affordable as borrowers enjoy a low monthly repayment. Many lenders in UK give secured loans, but each one has a different rate of interest, repayment periods, and terms and conditions. The borrowers need to be aware of their interests and needs and go for the best possible option. The large sum helps the borrower to bail himself out of his consolidated debts. But one needs to be aware of the pitfalls of this kind of loan.

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