Articles
Secured loans in the UK.
At some or the other stage of our lives we need to
fund a need that we can’t manage with our current
cash flow. These needs could be a vacation abroad, a
new house, a car or a family function. This is the stage
when loans come to our help.
Types of loans
Loans could be secured or unsecured. Unsecured loans
are not backed by any security or collateral. Credit
cards are examples of unsecured loans. Secured loans
are backed by a collateral or security and hence the
term ‘secured’. The collateral could be
a house in case of a home loan or the vehicle in case
of a vehicle loan.
When does a borrower need these loans?
UK residents borrow billions of pounds every year.
Borrowers take these loans to meet the high standard
of living which they may not be able to do at their
current income level. It is a very practical option
to take a loan these days. The interest rates are low,
easy repayment option are available and above all if
a borrower does a bit of shopping around he/she can
get the best deal.
Interest rates on a secured loan
In case of secured loans the interest rate is known
as annual percentage rate or APR. APR in case of a particular
loan depends on a host of factors like borrower’s
credit history, loan amount, loan duration and some
times on the lending institution.
The interest rates are the lowest on secured personal
loans in the UK. APR typically ranges from 6% to 25%.
As a borrower you may get the best interest rate if
you have a very good credit history backed by collateral.
Real estate properties command the lowest APR since
the property serves as a collateral and there is less
depreciation in the property. Other forms of loans like
vehicle loans command an interest rate that is greater
than that in case of real estate.
How is the collateral handled by the lender?
The lenders do not interfere with the property or collateral
being used by the borrower. Only when borrowers do not
pay up the installment amount over a long period of
time and after repeated reminders the lenders take the
possession of the collateral. Getting a secured loan
in UK is cheap and very convenient. Secured loans are
economical for the borrowers because of the low interest
rates.
How does a secured loan create a win-win situation
for everyone?
If you have no established credit history or a bad
credit history then secured loans are the type of loans
that you should look out for. Immigrants to UK might
face this problem because of a lack of an established
credit history for them. Lending institutions find it
convenient to give out secured loans rather than unsecured
loans by virtue of the collateral that the borrowers
offer. The borrowers are also less likely to default
the loan because of the fear of losing their collateral.
This way secured loans in UK are creating a win-win
situation for everyone.
A borrower with a good credit history, collateral and
good income sources can expect loan amounts to the tune
of 125% of his/her property value.
How customer oriented is the whole process
of obtaining a loan?
In UK the borrowers have very flexible borrowing options
which are quite similar to the unsecured loans. The
lenders have also started offering web based application
methods. The whole process is being made with minimum
documentation and time of the customer. In UK a secured
loan processing takes around 14 days and the borrower
can choose to cancel the it anytime during this period
without incurring any penalties.
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