Secured Loans – Making the Most of Your Home as Collateral

Secured Loans – Making the Most of Your Home as Collateral

By Andrew Baker

My visit to the lender was interrupted with my wife demanding a reason for my preference for secured loans. Though I hushed up the matter then, it kept on ringing in my mind hours later. Actually, I didn’t know of options other than the secured loans that are available. The various instances of people that have lost their homes to lenders that she used to supplement her contention refused to leave my thoughts.

Therefore, the first thing that I did on reaching the lender was to put my wife’s question thus. What makes secured loans more favorable for me? And the answer that I received has made me content that secured loans are the best for me.

The answer that I received could have helped a number of people who try to seek alternative sources of finance fearing secured loans can be perilous to their homes. Through this article, I have tried to bring forth the various aspects of secured loans that make them more favorable.

Secured loans are easily available:

Secured loans are most favored by the lenders. Lenders vie to have the business of the borrowers who are ready to offer collateral. As mentioned, homes or property most often serve as collateral in a secured loan deal. This lessens the amount of risk that is otherwise associated with loans. Borrowers can exercise the right to choose secured loan deals from among the various secured loan providers.

Get favorable terms on secured loans:

Since the degree of risk in secured loans is lesser, lenders do not deter from making the terms a little more flexible for the secured loan borrower. Therefore, whether you need a higher amount or need it over a longer time period, you just have to mention and lenders will themselves match term with your requirements.

Employ the equity lying idle in your home through secured loans: Home equity is the value of the home that it may fetch if sold. Thus, equity shows the market value of the home. By taking a secured loan, one can use the equity in home. Using equity in home does not mean selling the home, because equity is replenished through the regular payments that one makes on the secured loan. It is because of the equity that borrowers get the best terms on secured loans.

Secured loans at the lowest rate of interest:

Secured loans are credited with offering the lowest interest rates. Interest being a function of risk embroiled, is lesser in case of secured loans. This is the most important aspect of loan. Therefore, they must be studied with care. The use of APR and loan calculators can be made to understand the concept of interest properly.

Arrange larger sums of money through secured loans:

It is normally difficult to save as much money as we can arrange through secured loans. The expenses leave little to be saved. Through a secured loan however, people can easily get their hands on a lump sum that can be used for purposes like constructing homes, making home improvements, buying a car, doing away with the debts and many more.

Ease in repayment:

It is much easier to repay the secured loan. Borrowers can choose the term of repayment and the repayment method in the manner that they feel will be suitable. The interest cost is included in the amount of secured loan and is then broken into the number of months comprising the term of repayment. Borrowers pay either the whole of the installment or the interest under a different scheme called the interest only method.

Secured loans may limit the incidence of debts how can secured loans that themselves are debts help in curbing debts? Secured loans are offered against the equity in ones home. Lesser is the equity, lesser is the amount that people qualify for. Thus, secured loans may help in curbing debts (at least the debts incurred through loans and mortgages) to a large extent.

Nevertheless, secured loans are not free from their share of disadvantages. With the home on stake, sufficient caution needs to be exercised in making the various decisions regarding the secured loan. Ill-informed decisions can lead the disadvantages to have an upper hand in secured loans.