Guide to UK Secured Loans
A secured loan is where the borrower agrees to provide the lender with security against the loan in case the borrower cannot repay the loan. In most cases secured loans applies to home owners, who agree to provide “security” (a mortgage) over their home in return for the loan being agreed. However, other forms of security can be provided, for example, with a car loan the security is the car. On the loan has been repaid in full (including the interest), the security will be released.
Since the risk to lenders is far less in the case of a secured loan than in the case of an unsecured loan, interest rates reflect this fact (i.e. are lower than in the case of an unsecured loan).
Secured loans, therefore, are a very attractive option available to homeowners who want to carry-out any home improvement, or who want to consolidation of some their existing unsecured debt as secured debt – thereby taking advantage of the lower rate of interest.
To help you do this, you can compare UK secured loan provides online right here and now to make sure the secured loan rates offered to you are the lowest you can possible get!
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Secured Loans: Secured Loans are for those homeowners in the UK who wish to get some of the best rates available by securing the loan with their property. Since the risk to lenders is far less in this case than an unsecured loan, these secured loans are often easier for homeowners to get especially if the homeowners credit is not otherwise perfect and he may have received ccj's (County Court Judgment). The rates reflect the fact that the risk is less to the lender. This option is very attractive to the homeowner in case of a home improvement or consolidation of some existing debt. Currently secured loans are offered at low rates ranging between 7.5 – 8%.
Unsecured Loans: It is a loan given on faith of payment. Lenders consider unsecured loans risky and this results in their charging higher interest rates. The loan is legally binding, but is not backed by a secondary form of security. If the loan is defaulted upon, the lender has no other methods available for collections other than legal retribution. Unsecured loan is good for people without property to secure the loan, such as a tenant, a young adult without property or someone just trying to establish credit. But unsecured loans have some serious limitations. The lender usually charges a higher interest rate for an unsecured loan, because he assumes a higher amount of risk. An unsecured loan is often harder to get than a secured loan. Banks are offering a variety of options for this type of loan. Line of credit, signature loans, short-term loans, personal loans, student loans, auto loans and various others loans come under unsecured loans.
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Debt Consolidation Loans: Debt consolidation loans can be used to pay off debts incurred on credit cards, personal loans or any other unpaid bill that are required to be consolidated with a new loan to cover all the existing debts. As these loans combine all the debts payments they often provide you with a lower monthly payment as well as better interest rates. A variety of options are offered with debt consolidation loans including applications for homeowners and those with ccj's or bad credit.
Procedures when applying for a loan:
A Loan secured on property in the U.K is regulated when under £25,500. As such they are subject to the laws of the consumer credit act. The following process will be administered:
- You will be called at a convenient time to discuss if one of the loans is the right way to go for you.
- Once this is established and confirmed, Advance Documents are issued to you that include an Application Form, a Copy of the Credit Agreement and sundry other documents dependent on your loan case.
- Few days later, taking into account the mandatory cooling period, signable documents are issued. These include the Legal Charge (enabling the company to place its charge on the property) and the master Credit Agreement that the customer has to sign.
- Once a signed application is received the company is able to order a Mortgage Reference (which is required in almost all cases) from the mortgage lender, order legal Search on the property etc.
- Once the cooling off period is over, valuation of the property can be arranged for (required in most cases). Other documents required from the customer usually include Buildings Insurance, Pay slips/Accounts/Self Declaration Form, Proof Of Residence if not on voters role, Mortgage Statement.
- Once all documents are received and provided the case still fits the criteria, the deal will be submitted to the lender who, if they like everything, will issue the cheque in 1-2 days. The cheque will go direct to the customer, made payable to the customer.
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