Secured Loans : Why They Are The Winning Product

As financial products go, secured loans have stood the test of time. Whilst many other alternatives have entered the market over the past couple of decades, this type of loan has remained the most popular financial product for homeowners.

One of the biggest competitors vying for the attention of the public is the unsecured loan. Unsecured loan providers have tried to cash in on consumers insecurities by pressing home the fact that a secured loan is tied to property. They try to scare people away from taking out a secured loan.

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But the secured loan has managed to fend off this competition in the ever more cutthroat financial sector. These loans continue to be the product which is taken up by more people than any other, except of course for a mortgage loan which is essentially the same as a secured loan, but is usually spread out over a longer period of time.

The reason secured loans have remained this popular is because they offer a much wider array of benefits than, for example, an unsecured loan.

The biggest benefit for the consumer when taking out a secured loan is that more often than not the interest rate will be substantially lower than most other products in the personal finance area. The most obvious exception is the mortgage.

If you shop around you can often find a secured loan with an interest rate as low as 7 or 8 percent. However at the time of writing this article you will be lucky to find a secured loan in the UK market below 11 percent.

Even so, nearly every other financial product you'll find out there will charge a substantially larger rate of interest. There's often a discrepancy between the rates of interest advertised by lenders and the actual rate which you'll pay. Lenders always have to advertise their standard rates.

But you will find that, depending on your situation, you may well be able to obtain a lower rate. Conversely if your situation is not so favourable you may end up paying more. To obtain lower rates than advertised you may need to be able to prove substantial levels of collateral. If you have an excellent credit rating you may also get a lower rate.

Another reason for interest rate changes which may not be obvious is the fact that if you wait too long to make your decision regarding your provider, then the market conditions may have altered since you initially began your research. The lender will never guarantee an interest rate until you have signed on the dotted line.

Furthermore, you will find that with a secured loan you will be able to borrow substantially larger amounts than if you were applying for an unsecured loan. Since with an unsecured loan the lender is taking more risk they are less likely to offer you larger amounts of money. They take risk management very seriously and have turned it into a science.

The reason you are able to borrow much more when taking out a secured loan is because the amount is secured on your property, hence the name. Should you get into difficulty meeting your repayments then the lender knows they can repossess your home if you continue to default.

Since with a secured loan the borrower is taking much more risk then the lender is more prepared to provide a larger amount. Again this is all determined by their risk assessment of your specific situation.

Possibly one of the major reasons that secured loans have become so popular is the fact that they are readily available, assuming you can prove your circumstance. The majority of comparable financial products are nowhere near as accessible as a secured loan. This is because you have to work much harder to prove your situation when taking out alternative products. With a secured loan all you have to do is put your property forward as security. Because of this most lenders will have no problem in approving your secured loan assuming you are not up to your eyes in debt already.

Another major benefit with secured loans is the fact that they can be used for a wide range of applications. You will usually find the lender places no restrictions on what you want to use the loan for. Common examples would be renovation work on your home, taking a holiday or buying a new car. But the options don't stop there. Pretty much anything you want to do with the money is acceptable.

You also have more choice when deciding the manner in which you want to repay your loan. These options change regularly and you'll need to talk to your lender about the various avenues open to you. Make sure you ask them about paying your loan off early and whether there are any redemption charges.

So bearing in mind the facts outlined in this article you should have more of an idea of what to expect when you apply for, or are shopping around for your secured loan. It is virtually impossible to get on in this life without borrowing some money, unless you're very lucky - a secured loan is one of the best ways you can do this.

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