Secured Loan

A loan or other credit facility where a lender has the comfort of security to rely upon if you don’t keep payments up.

A secured loan is any loan that requires the borrower to provide the lender with some form of security. In the case of secured loans the security will be the borrower’s property, regardless of whether it is mortgaged or owned outright.

Secured home-owner loans are available in varying amounts and for many different purposes. The amount available usually ranges from £3,000 to £50,000, although some lenders will consider lending up to £100,000. The amount borrowed is repaid monthly over a term agreed at the outset, which will usually range between three years and twenty five years. You may be charged a penalty if you repay your loan earlier than agreed, and you should check each lender’s individual policy with regards to this.

Other forms of secured credit facility may include maritime mortgages and many types of car lease finance, including contract hire. In all cases, including home mortgages and car lease purchase agreements, the credit agreement passes or retains ownership of the asset (be it a house, boat, car or other) to the lender. Ownership passes back to the borrower when the loan is repaid, or in the case of car finance via lease purchase, when a final balloon payment is made. Otherwise the car is returned to the lender at the end of the lease purchase term.

Lenders charge interest on the amount you borrow, which is referred to as the Annual Percentage Rate (A.P.R). The amount you can borrow, the term available and the A.P.R will all depend upon the equity you have in your property, the lender`s view of your ability to repay the loan and your personal circumstances, for example any adverse credit. The A.P.Rs quoted by the lender will usually be typical rates, and these act as a guide only as the exact rate offered will be on an individual basis. As a general rule, it is advisable to compare the A.P.Rs of different loans, as this is a good way to determine how competitive they are.

Generally, secured loans are much easier to obtain than unsecured loans. This is because the lender has the added benefit of security, which provides protection in the event of a customer`s inability to repay. This also means that persons who are self-employed, have recently changed jobs or who have adverse credit can take out a loan. They are also useful for larger amounts or where the applicant requires a longer repayment period.

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