When people want to make investments, fill financial gaps, or even go for a holiday, one of the best funding options is going for a loan. While there are different types of credit offered by lenders, the secured loan stands out because of its low-interest rates. Here is a complete guide to help you make the right decision on whether to go for the secured loan.
What exactly is a secured loan?
A secured loan is a form of credit where money is advanced against a specific asset. In many cases, lenders can agree to lend you cash against collateral such as a house, vehicle, boat, or other types of asset.
Why people go for secured loans
- When they want to borrow large amounts: If you want a personal loan, many lenders can only take a certain risk. In many cases, only up to £25,000. If you want a larger sum, the best way is going for a secured loan.
- They have low-interest rates: If you compare payday loans to secured loans, the former has very high-interest rates because of the high risk involved. However, secured loans have very low-interest rates of about 5%-6%.
- Longer repayment period: With secured loans, borrowers are allowed to pay the loans over a long period. This means you only pay a very small amount every month.
- The approval is easy and fast: As long as you have an acceptable asset and sustainable source of income, the lender will easily approve the loan.
- Even people with poor credit score can still get the credit: Many people with poor credit score are turned away by most lenders because they are considered high-risk parties. However, lenders are willing to lend cash as long as you can provide good collateral. If you have poor credit score, the amount lent will be smaller.
What you need to get a secured loan
Many lenders in the UK have different requirements before approving secured loans to borrowers. The common requirements include;
- Good credit history: Though lenders are willing to provide secured loans even to those with poor credit score, the amount will be lower in such cases. To get the loan you want, a good credit history is required. Note that even though the lender uses the collateral as security, the main goal is not to ultimately auction it. Rather, the lender wants you to repay the loan and make a profit.
- A reliable source of income: This is a requirement for most loans including the secured types. The source of income is used to establish personal repayment capability to lower the risk of default.
- Steady UK address: Lenders will only agree to lend people with steady UK address. You are required to have stayed in a specific residence for about 3 years by the time of application.
Whether you are looking for a loan to finance major assets, start a business, or even personal use, most lenders will be willing to consider the application as far as valuable collateral is provided. The lender only wants to get a good repayment plan and understand you clearly before approving the credit.