Secured loan
1. Introduction to Secured Loans: .
A loan is said to be a secured loan when the borrower pledges the lender with security, normally the borrower ?s property. It doesn?t matter the property is already mortgaged or owned outright by the borrower. If loan is secured against the property which is owned outright by the borrower is known as first charge and if the loan is secured against the property which is already mortgaged is known as second charge .
2. How it works: .
Secured loans are available for many purposes and for varying amounts. The repayment of the loan will be on a monthly basis for a term agreed by the borrower and the lender usually ranges between three years and twenty five years. There is provision for premature closure of these loans subject to early closure penalty charged by lender. One should check each lender?s individual loan policies with regard to the terms and conditions of the pre-closure .
Interest on these loans is charged on the amount one borrows, which is referred to as Annual Percentage Rate [A.P.R]. The maximum amount one can borrow, the repayment term and the A.P.R will depend upon the equity the borrower is having in his property, lender ?s assessment of the borrower?s ability to repay and the personal circumstances of the borrower like adverse credit rating. Subject to the assessment made by the lender one can borrow a maximum of 125% of the value of the property. Usually the interest rates offered by different lenders of secured loans are competitive compared to unsecured loans since the lender enjoys the benefit of security .
3. How to Apply: .
A customer can have the option of applying the lender ?s branch network, over the telephone, via written application or online through the lender ?s website. If the applicant is married, most of the lenders insist on putting both parties name on the application. Lender?s usually makes the initial assessment of the application quickly. After this the customer is allowed a 7 day consideration period in order to assess the implications of the credit agreement and to ensure that the customer is fully aware of the terms and conditions of the loan. Before approval lenders will consider the income, repayment capacity and credit history of the customer. For assessing credit history of the customer lenders normally use credit scoring facilities or the services of credit reference agencies. On successful completion of the entire assessments lender will approve the loan to the customer .
4. Conclusion: .
Secured loans easier to obtain compared to unsecured loans since the lender has the advantage of security. This gives the lender protection against default by the borrower. The borrower enjoys lower monthly repayments compared to unsecured loans. However one should compare the terms and conditions especially A.P.R?s of different loans offered by different lenders to get the best product.
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