Cheaper Secured Loans Can be Easy to Get

By: Lara Sawyer

Secured loans are probably the most inexpensive source of funds. Thus, when you need cheap financing, these loans are the best way to go. However, it is possible to obtain even better terms if you take the time to research a little. Following are some tips on how to obtain lower terms and better conditions.

Home loans and home equity loans are both secured with an immovable property. But though the home loan is secured with the house or condo, the home equity loan is secured with the remaining equity on the property. That is the difference between the value of the property and the debt that the asset is currently guaranteeing.

Getting Cheaper Mortgage Loans

If you want to get a lower rate, there are several things you can do. Let's start with the obvious that sometimes can be not so obvious: Your credit score will determine the interest rate you will pay. Therefore, if you can wait a couple of months to request the loan and work on improving your credit, chances are that you will get a much better rate when you actually apply for a mortgage

Another important issue is Private Mortgage Insurance. PMI can greatly put up the price of your mortgage payments. Unfortunately PMI is compulsory on any loan product that exceeds 80% of the purchase price of the property. Therefore, if you want to avoid paying PMI you need to save enough money for a down payment of at least 20% of the value of the property.

Getting Cheaper Home Equity Loans

Home equity loans are just like home mortgages when it comes to credit score and history. If you can improve your credit score before applying chances are you will get a much better interest rate. However, the importance of credit score and history on is less significant than on unsecured loans and the interest rates charged are always higher than that of mortgage loans with similar credit scores.

An important variable on loans based on equity is the amount of money you request. The higher the amount of equity you will use, the higher the interest rate you will have to pay. For instance, on a $100,000 house with $60,000 in outstanding debt, the remaining equity is $40,000. Anything above $20,000 implies more than 80% financing and will also imply higher interest rates while lower amounts can imply more advantageous terms.

Vehicle Loans

When it comes to loans secured with vehicles, insurance puts up the price. Therefore anything that reduces the costs in terms of insurance will reduce your monthly payments and the overall rate of your car or motor vehicle loan. Special attention needs to be paid to the vehicle and the driver. Expensive vehicles that run too fast and young inexperienced drivers will turn loans more expensive. The opposite is also true, less expensive cars and experienced drivers imply lower insurance costs.

Secured Loans
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