accepted.co.uk - the loans search engine

A glance through the financial pages of any newspaper will tell you that credit has become a lot more difficult to come by. The exception to the general rule is in the availability of secured loans, which continue to offer borrowers opportunities for loans at relatively low rates. Why is this?  

It might be helpful to start with a dictionary definition that describes a secured loan as borrowing which is “backed by assets belonging to the borrower in order to decrease the risk assumed by the lender. The assets may be forfeited to the lender if the borrower fails to make the necessary payments”.  

As the definition spells out, when a borrower offers assets as security for a loan it reduces the lender’s risk because he can repossess the collateral property if the borrower defaults on the repayments of the loan. Furthermore, in the very act of advancing his assets as security, the borrower is indicating a faith in his capacity to repay the loan. In other words, borrowers have a much greater incentive to maintain their loan repayments if their valuable assets are at risk. 

Thanks to the security that the lender has been offered, he is prepared to advance the loan at a much more favourable rate of interest than would be necessary for a higher-risk unsecured loan.  

It can be seen, therefore, that both borrower and lender benefit. More than this, however, different types of borrower can benefit from secured loan finance. Those with a healthy credit rating, using their home to secure a so-called homeowner loan will be able to release equity that has built up in the property to finance home improvements, for example, at particularly advantageous rates of interest. Alternatively, such secured loan finance can be used for the process of debt consolidation, where the loan is applied to buy down various other high-cost debts, such as credit cards or other unsecured loans.  

Finally, secured loan finance may prove to be the only realistic means of borrowing for those who have a poor credit rating, past county court judgments or even a history that involved bankruptcy at some stage. With a homeowner loan, such borrowers can not only raise a loan at reasonable rates and conditions, but, through the timely repayment of monthly instalments, also demonstrate that they are now financially responsible enough to repair their past credit history.  

In summary, secured loan finance is about reducing the risk inherent in advancing a loan to any borrower. In return for the reduced risk, the lender can afford to offer a much lower rate of interest. Therefore, secured loan finance: 

• Benefits both borrower and lender;
• In the form of a homeowner loan, can release equity in a property for borrowing at attractive rates for such things as home improvements; 
• Can provide the route to debt consolidation;
• Offers a means for even those with a poor credit rating to raise a loan at a reasonable rate of interest and, in so doing, help to repair an adverse credit history.

Robert Beaumont is the author of this secured loans article.

This article does not represent ‘financial advice’ as each person's individual requirements will be unique to their specific needs. If there is something in the article which you which to rely on then please check those details with the person with whom you arrange a financial product or service.

The views in this article represent those of the author and not those of Netbasic Limited.

The latest research from the country’s largest consumer pollsters, YouGov, shows that up to 6.5 million people over the last three years have opted for debt consolidation as a way of wresting back control over their debts. For those serious about getting their debts under control a homeowner loan could represent the best route to debt consolidation. 

A homeowner loan is just what it says it is – a loan taken by a homeowner, with the home offered as security. Because it is a secured loan, with a considerably reduced risk for the lender, the borrower can reap the benefits of a lower rate of interest than an unsecured loan. At the beginning of 2008, for example, the price comparison website moneyexpert found that the typical interest rate on credit cards was 17.01%, and 8.44% on the average unsecured loan. Homeowner loans, however, could be found for as low as 5.9%. It is easy to see the attraction, therefore, why it can be worth considering consolidating high-interest credit card and unsecured debt into one, secured loan.  

It is also interesting to note that, according to the same source, the majority of homeowner loans are now being taken by borrowers who have been rejected for an unsecured loan because of an adverse credit history. This, again, lends weight to the use of a secured loan as a vehicle for debt consolidation.  

Obviously, however, homeowner loans also have other uses other than debt consolidation and can be a source of major borrowing over an extended period of time. Although the current state of the financial markets has made a loan of 100% or more of the property’s value a thing of the past, it is still possible to borrow substantial sums by way of homeowner loans.  

There is no doubt that lower rates of interest and the potential for borrowing by otherwise riskier customers make homeowner loans an attractive proposition. However, prospective borrowers should watch out for the arrangement fees likely to be charged by the lender or broker advancing a secured loan. This reflects the need for the greater degree of formality involved in a secured, compared to an unsecured, loan and is not included in the advertised rate of interest on the loan itself.  

A further note of caution about using a secured loan as a means of debt consolidation is that such borrowing should be used to clear accumulated debt, rather than to start out on a fresh round of borrowing on credit cards or other unsecured loans. Such a new spiral of debt would prove even more costly.  

The reason for sounding such cautionary notes, of course, is that the whole principle of a secured loan such as this is that your home is offered as security. If you get into difficulties with debt once again and fail to meet your repayment obligations, then you stand to lose your home.  

In summary, a homeowner loan offers many people the opportunity of getting their debts under control, since: 

• On average, it offers a considerably cheaper rate of interest than either credit card borrowing or an unsecured loan;
• According to some recent market research, the majority of new homeowner loans are being taken up by borrowers seeking debt consolidation; 
• Homeowner loans may be available to those who would otherwise be refused an unsecured loan;
• There will be an arrangement fee for drawing up the terms of a homeowner loan;
• By offering your home as security against the loan, if you default on the repayments, your home would be at risk.

Mel Harley is the author of this article.

This article does not represent ‘financial advice’ as everybody's individual requirements are unique to their own needs. If there is something in the article above that you want to rely on then please check the details with the person from whom you purchase any product or service.

The views in this article represent those of the author and not of Netbasic Limited. 

Secured finance is safer finance. Since the risk is reduced, lenders will generally be prepared to offer a lower rate of interest or consider applications from otherwise less attractive borrowers. Why is that?  

Secured finance is about offering equity with which to secure a loan. Equity is the actual value of the collateral that is used by the borrower when applying for a loan. The lender will typically determine the amount of equity by deducting any debts you have from the market value of the collateral you put forward. The effect of this is to guarantee the loan by assigning to the lender rights to the security in the event that the borrower defaults on the loan. This is called a secured loan.  

The most commonly used collateral for such an arrangement is the borrower’s own home, or the part of the equity in the home which is not already given as security for another loan (i.e. in most cases a mortgage). If the property is owned outright, the whole of its value can be offered as security and assigned as a so-called “first charge”, whereas if there is an outstanding mortgage, the mortgage loan continues to take first charge and the secured loan takes “second charge”.  

It can be seen, therefore, that a note of caution should be sounded when offering your home as collateral for a secured loan. If you default on the repayments of the loan, then the security – your home – is at risk and could be reclaimed. A homeowner loan needs to be taken seriously.  

Secured finance by way of a homeowner loan also provides an opportunity for raising funds by those who would otherwise find it difficult, such as the self employed or those who have experienced financial difficulty in the past. A poor credit history is often likely to lead to rejection of an application for an unsecured loan where the home is not offered as security.  

A further use for secured finance is debt consolidation. Thanks to the loan being secured and the lower rate of interest that can be offered on the lower risk, it can, in some circumstances, make sense to roll up a number of high-interest bearing loans into one secured loan. Quite often, repayment terms and conditions can be more flexible, enabling you to borrow more money over a longer time span. Debt consolidation in this way can make debt management easier not only by reducing the overall cost, but by having just one monthly payment to make, though generally over a longer period of time.   

Secured finance is attractive because: 

• It attracts a generally lower rate of interest;
• The equity in property ownership can be offered as security; 
• It offers a means of borrowing for those who might otherwise find it difficult to secure a loan because of their poor credit rating;

Debt consolidation of several short-term, high-interest debts into one lower-interest debt allows repayments to be spread over a longer time frame and still save money in the long run.

This secured loans article has been written by Eli Beaumont.

The above article does not represent ‘financial advice’ as everyone's individual requirements are unique to their own specific needs. If there is something in the article above that you would like to rely on then please check the details with the person from whom you purchase a financial product or service.

The views in this article represent those of the author and not of Netbasic Limited.  

Almost half of those who borrow money to buy a car choose an uncompetitive finance deal that could leave their finances exhausted, and drivers fuming. 

Almost one in five (18 per cent) of car owners typically used finance from a car dealer to purchase their car last year with four in ten (38 per cent) of those claiming it was for reasons of convenience.  

Despite many car dealers’ interest rates set well into double figures, one quarter (24 per cent) of borrowers believe that the finance deals offered by car salesmen are the most competitive available. A further six per cent admit to signing up after a salesman convinced them that their finance was the best deal available.

UK motorists would set to waste almost £174 million by signing up to car dealer finance when they buy their new ‘08’ registration cars in March, following the sale of more than 2.4 million cars last year. 

A motorist borrowing £10,270 towards the cost of one of Britain’s best selling cars, the VW Golf (costing £11,411 on the road with a £1,141 deposit), would pay 9.4 per cent APR through a finance deal. That’s £2,162 in interest over three years.  

However, financing the purchase with a personal loan with a typical APR of 6.7 per cent, the total amount paid in interest would be £1,068 – a saving of £1,094.

Over one in five (21 per cent) of all unsecured personal loans are for new or second hand cars. There is a multitude of deals available to prospective buyers, not least from banks and building societies as well as car dealers themselves. It's important you consider a number of factors before choosing your finance deal. 

Unsecured personal loan rates are only available to people with a good credit history so not all car buyers will be able to get them. However, it’s still worth shopping around as our analysis shows that dealers charge up to 11.8 per cent APR.  

Some car dealers offer zero per cent finance on new cars, these deals are definitely worth considering if you can get one, however you may have to pay a hefty deposit though.  

When looking at car dealership finance, make sure you take into account the size of the deposit and the final payment as well as the monthly payments as this can really ramp up the overall cost.  

Car dealer finance is not the only way new car buyers can lose out – depreciation is also a big factor to consider as some new cars can lose anything up to 58 per cent of their value in the first year alone. While it is better to shop around for a personal loan in order to get your new car, saving a small deposit could save you thousands in the long run.

The author of this loans article is Mel Varley.

This article does not represent ‘financial advice’ as everybody's individual requirements are unique to their own needs. If there is something in the article above that you want to rely on then please check the details with the person from whom you purchase any product or service.

The views in this article represent those of the author and not of Netbasic Limited.