Homeowner loans are commonly known as secured loans which is where the borrower pledges their asset such as a property or land. An unsecured loan on the other hand does not require the use of property as collateral. Instead the creditor is satisfied with just trust alone that the debt will be repaid.
- If you default on your payment for any reason, you could be made to sell the property you kive in so be very careful indeed.
- The rates for this type of loan are often lower.
- Even with bad credit history, providing the property is of significant value, you can still be accepted.
- The loans are not rigid, and may be extended or ‘topped up’ if necessary unlike unsecured loans.
The creditor will be protected from the financial risk, because this type of loan allows repossession in event the payment is not made.
The disadvantages related to homeowner loans are:
- The lenders will check your credity history before giving you the money you have applied for. So if its really bad, you may not be approved.
- Lenders decide the conditions of repayment, like for how long you have to repay the loan, APR and how much you pay each month.
- Lenders usually base their decisions on credit score and ability to repay ie your employment status.
Unsecured loans do not have per-requisites of property or assets, but usually are only available sub £10,000. With good credit history, a borrower may obtain their loan with low rates of interest, which have to be paid in monthly installments.
- The overall process of getting a credit is easier and much faster than secured loans which are based on home equity and mortgage.
- It involves less paper work and additional charges.
- Homeowners as well as non property owners can also apply for this loan.
- It does not put your property at risk.
- The monthly installments are in terms of fixed rates, which do not change time to time. The monthly payment remains the same.
The disadvantages of unsecured loans are:
- The rates and the time of repayment are fixed by the lenders, which can be extended as per requirement in secured loans.
- Large amounts of money cannot be borrowed.
- If the debtor pays off the loan earlier than anticipated, they will be liable for an early repayment charge which is not a common characteristic of secured loans.
- The application terms are also quite strict and if the creditor believes that you cannot meet the repayments they may decide to cancel your loan.
A Homeowners’ loan should be obtained from a reputable lender who has a proven track record in managing this type of loan to a wide range of customers, contact apply loans today if you want to hear more about homeowner loans.