Loans and Mortgages
Published: 5th March 2008
by Peter Kay©
Secured Loans
A secured loan is a loan which is secured against an asset, most commonly a house or car, which is known as collateral. If a person fails to keep up the repayments on the loan, the lender can take control of the asset the loan was secured against, and sell it to recover the money. Because of the collateral, secured loans usually offer lower monthly repayment rates than unsecured loans. They are also easier to obtain than unsecured loans, particularly by people with low incomes or poor credit ratings.
Unsecured Loans
Unsecured loans differ from secured loans in that they are not secured against any particular asset. Because of this, they usually have higher interest rates and so higher monthly repayments. Due to the lack of collateral however, they are harder to obtain as a lender will view them as more risky than secured loans. If a person fails to keep up with repayments on an unsecured loan, the lender can begin court proceeding against the person and their home, so a person can still have their assets seized if they default on an unsecured loan.
Debt Consolidation Loans
A debt consolidation loan can turn all your existing debts into one single loan with affordable monthly payments. This single loan may be another unsecured loan, but is more likely to be a secured loan, where the loan is secured against an asset, such as a house, and allows the lender to offer a lower interest rate because they can force the sale of, or take possession of, that particular asset. A debt consolidation loan is most advantageous when a person is paying off a number of high-interest debts, such as credit cards.
Fixed Rate Loans
Fixed rate loans are just as they sound; loans which have a fixed interest rate over the term of the loan. This provides peace of mind for the borrower, as they know that their interest charges and monthly repayments won't change however much interest rates vary during the term of the loan. Whilst a fixed rate loan does provide peace of mind in that your repayments wont ever be any higher should interest rates increase, if interest rates decreased then you would be paying more interest than you would had you taken out a loan with a floating interest rate.
Self Employed Loans
Many self-employed people find it difficult to take out loans due to the fact that their income will vary each year depending on the fortunes of the business, unlike a guaranteed salary if they were employed by somebody else. Many lenders now offer competitive low-cost loans for people who are self-employed on similar terms to those with a guaranteed income. Self-certification loans are also available, where the lender won't require any proof of income.
125% No Equity Loans
125% loans allow a person to borrow more than the value of their property, which is useful for those with an existing mortgage which is close to or more than the value of the property.
Home Equity Loans
A home equity loan allows you to borrow money which relates to the amount of equity in your home, allowing you to obtain money from your home without selling it. With a home equity loan, the home will act as collateral, meaning that your home may be re-possessed if you fail to keep up the repayments.
Please note: The loan and mortgage information given above is intended as an information guide only, and does not constitute or act as a substitute for, professional advice.
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