Is a Secured Loan your Answer to Managing your Finances?

By: Luke Ashworth

Apacs, the UK's payments body, has warned that only half of us check through credit card statements carefully, meaning many extra fees and charges could be being paid without us even knowing. In addition to this, many consumers may find the way their balance is being divided a little confusing, as often different amounts of debts are charged at different interest rates. This makes it even harder to understand exactly what you are paying and why you are paying it.

Although people are getting better at checking their statements, research suggests that there are still too many of misunderstandings. Taking out secured loans or homeowner loans can be a much cheaper option and a much more simple way of managing finances in comparison to a credit card.

As well as typically offering a much lower interest rate than a credit card, a secured loan or homeowner loan can produce all your payments together, making it easier not just to manage your money but also to consolidate your debts. A secured loan can be used for almost any purpose such as paying off expensive credit cards and reducing monthly repayments, home improvements, a new car, a wedding or that long awaited holiday.

Secured loans are secured on your property. This means that the lender is taking less of a risk in lending you the money and the rates are lower than for unsecured loans. Secured loans are also available to people who may not be eligible for an unsecured loan such as people with a bad credit rating, or people who are unable to prove their income. This may also be a solution for those who are relying on an income from benefits or a pension. Larger secured loans are also available, depending on how much equity is in your property. However, it is important that you know that you are at risk if you don't keep up the repayments.

UK mortgage brokers are increasingly focusing on secured loans making it easier for consumers to get good quality advice on when to take out such products. This is just one finding revealed by a new study carried out by the Association of Finance Brokers (AFB). Its survey of UK mortgage intermediaries said that around 50 per cent of respondents now advise on mortgages, with 56 per cent having advised on between one and ten secured loans in the past month. Close to 20 per cent of intermediaries placed their business with ten or more lenders.

In recent years mortgage brokers have been saying that they want, or intend, to become more involved in offering secured loans. Mortgage brokers are increasingly using secured loans as an appropriate part of their advice to consumers. This should ensure that the customer receives good quality advice. Although only 20 per cent of intermediaries did not offer Payment Protection Insurance (PPI) with the loans they advised, the remaining 80 per cent offered PPI either as a monthly premium or a choice of a monthly or a single premium.

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