HOME OWNER LOANS
This is a loan where the lender requires the borrower to place his property as security for the loan. If a mortgage is already in place on the property this sort of loan is known as a second charge.
Amounts of £3000 to £100,000 are usually available under these circumstances and are known as secured loans.
Payments of an agreed amount and over an agreed period, on a monthly basis, are arranged at the outset of the loan.
The period of repayment can be between three and twenty five years. If the borrower should wish to repay the loan early there may be a penalty charge. Early repayment can be a different policy for individual lenders.
Interest will be charged on the sum borrowed, which is measured by the Annual Percentage Rate (APR). The amount borrowed, the APR and the term available will all depend on your own circumstances and the lenders view of your ability to repay your loan. Some lenders will lend up to 125% of the value of your property (including the amount outstanding on any original mortgage.
Lenders usually quote APR's as a typical rate and these are only a guide, as any exact rate offered will be on an individual basis. It is a good idea to compare the APR's of different loans, beause it can be the best way of deciding how competitive they are.
Secured loans, in general terms, are easier to acquire than unsecured loans. This is because the lender secures a charge on your home. This, of course, protects the lender in the event that the borrower is unable to make repayments. It also makes it easier for borrowers who have recently changed jobs, are self employed or have a poor credit history to obtain loans. It is also more appropriate for larger amounts where a greater period is required to repay the loan.
Applying for a secured loan:
Depending on the lender, this cane be done via their website, by telephone, by visiting a branch office or by written application. The application will be quickly assessed, although the Consumer Credit Act regulates loans under £25,000, which requires a consideration period of seven days to be given to ensure that you are happy with all the terms and conditions.
When assessing an application three main criteria are considered by the lenders:
1. Income and affordability - to determine whether or not payments are capable of being maintained by the borrower to repay the additional finance.
2. Equity - to assess how much the loan can amount to given the value of the security offered.
3. Credit status - to take into account county court judgments, mortgage arrears and defaults.
Your home may be repossessed if you do not keep up repayments on your mortgage.
All loans and mortgages are secured on property. Think carefully before securing other debts against your home.
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