Homeowner Loans

What is a Secured Homeowner loan?

A secured homeowner loan is a type of lending that uses your home as security - so the lender has a guarantee that they will be able to get their money back no matter what happens.

Secured homeowner loans can be used for a number of different reasons, whether you need to raise a large amount of money quickly, for example to undertake major home improvements or you may have a bad credit history and are unable to get a unsecured loan. 

Because lenders have a guarantee of repayment, it can be easier to get a secured loan than some other forms of credit but this doesn't mean you should enter into the agreement lightly.  If you are unable to keep up with the loan payments your home will be at risk of repossession so make sure you understand the full agreement and read all of the small print before entering into any contract.

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What are the advantages?

The main benefit of a secured loan over an unsecured loan is the ability to borrow a large amount of money over a longer period of time. 

Generally you will find that the monthly repayments will be lower than with an unsecured loan, but don't forget to check the total amount payable as with a longer repayment period, this could be substantially higher than if you were to take out an unsecured loan with a higher APR (annual percentage rate) over a shorter period of time.

If you have a poor credit history and have struggled to get other forms of credit such as a personal loan or credit card, then you are likely to be considered for a secured loan, as although you may be considered a high risk to lenders normally, by offering your home as security, the risk to them is minimal.

How do I qualify for a loan?

You must be a homeowner to qualify - as it is your home that will be used as security against the loan. 

The amount you wish to borrow will depend on the equity you have built up on your home so you should consider this when you make your application.  Usually, lenders will ask your what you intend to do with the money as this may also affect the risk factor. 

If it's for making improvements to your home such as adding an extension, this is usually classed as a low risk as it will be adding value to your home.

If a lender considers the use of the money to be a higher risk, this does not mean you won't qualify for the loan - however, they could choose to put you on a higher rate of interest.

The risks

As with any form of loan, you'll need to keep up with the repayments in order to keep a clean credit score - and to keep the lender happy, but secured loans do carry a much higher risk than other forms of borrowing.

Because your home is being used as a guarantee for the loan, then any missed payments could put you at risk of having your property repossessed.
Your lender is entitled to sell your property in order to reclaim the value of the loan so it is imperative that you fully understand this before agreeing to a secured loan

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