Do you need a secured loan? Here are some of the things you need to know about secured personal loan.
What is a secured personal loan?
A secured personal loan is a loan where you have to give the lender collateral such as a land, building and so forth depending on the property that you have. This means that the lender may it be a bank or any other lender, is entitled to repossess the collateral in case you breach the agreement. Breach of an agreement could be a delay in the payment of the loan or even failure to pay the monthly installment. The previous installments however, are not refundable after the lender possesses your property.
It is lenders preference.
The lenders prefer this type of loan because of its back up; the collateral. They prefer this type of a loan because the value of the collateral is usually of a higher value than the loan. This is to ensure that the borrower sticks to the agreement. As you walk in that door you are sure that you want to get an unsecured loan but the moment you talk to the bank manager, he will try to convince you as much as he can to make you change your mind.
This is because as much as they want their clients to take loans, they do not want to take any chances regarding the payment. They will give you all sorts of excuses and especially if you do not have an excellent credit score. The manager will convince you into taking the secured loan in order to protect the bank from the hectic and tiring procedure of repossessing the property.
The lender ensures that the collateral is of a higher value than the loan so as to curb depreciation of the property. Within the life of a loan some of the properties depreciate in value. The bank cannot allow to lose any single cent to any one not even their client; I mean come on this is a profit making organization not charity work. This is why it is very important to think carefully before accepting that tempting offer that the bank manager is offering you.
Low interest rate
Secured personal loan is suitable to the borrower in that it bears a low interest. This is so because the risk is reduced by the collateral. If you actually have many properties and loosing this one then secured loan is the best deal for you in that the interest will be very low and we both know what this mean; paying less.
The property that you are giving the lender as the collateral is the major determinant of the Annual Percentage Rate (APR) that you will get in the secured personal loan. The higher the value of the property the lower the APR and vice versa. It is however very important to think twice before giving out that house or car that you value so much. It could be the beginning of you nightmares.
Giving the lender collateral that is almost the same value as the secured personal loan is the best decision you can ever make. Am sure you would rather lose a property worth the loan than losing a property that is a whole lot more.
Even with good collateral with you, getting a secured personal loan can be very difficult if you have a poor credit score. The lenders do not want to take any chances when it comes to lending money. You credit worthiness matters a lot when borrowing a secured loan.
You may have delayed in the payment of a previous loan due to some genuine reasons like sickness or something that really needed financial attention. This would be true but the fact that you delayed or failed to pay the monthly installment may lead to you being denied a secured personal loan. As you decide to get that personal loan think of the things that may hinder you from making the necessary payment. Find a way of doing away with such obstacles before signing those documents. This will save your credibility score and therefore enable you to get a loan easily.
Variation of secured personal loan from lender to lender
Secured personal loan APR can vary greatly. The APR generally are dependent on a number of things that may include the loan amount, the value of the property that is being used as collateral and the credibility of the borrower. APR for a secured personal loan bad credit borrower are usually higher than loans made to a good credit borrower.
However, secured personal loan APR for bad credit borrowers are still usually more demanding than interest rates provided on an unsecured loan. Having considered this, if you are interested in applying for a loan you should think about taking a debt loan personal secured option over an unsecured option in order to save yourself the risk of not getting the loan.
Personal secured loan rates can also vary from lender to lender. There are those lenders who are interested in financing a high value property like a house, a land or a similarly priced item may consider shopping for interest rates online to find the most competitive rates possible. As you shop for the secured loans from different lenders it is important to note that the APR tagged to the loan are meant for borrowers with an excellent credibility and that is why they are that low.
Secured loans are a major way for borrowers to obtain money needed to buy something, and they can also be used to refinance a project of value and obtain cash out from the lender. For borrowers with lower credibility, these loans may be simpler and more affordable than unsecured loan programs and credit cards. The fact that a property of value is used to back the loan as collateral normally creates an alternative for cheaper financing.
This can also be used as a secured personal loan in that you can sell your property to a pawn broker after which you can retrieve your property after an agreed period. This is the best option if you do not want to take chances with the bank. This option is very expensive compared to the bank option because of the interest rate tagged to the loan. If you think the loan will generate a whole lot of cash to be able to repay the pawn dealer the required amount then it is a good deal otherwise it is expensive. Do not go for it unless you are sure of the outcome.