Home owners in 2013 are in an unenviable position right now with the property market in a state that even a blind man could see is far from healthy but, there is light ahead. This could mean (in the near future) that those wishing to move home (either up or down the property ladder) might feel trapped as homes remain on the market for months and even years at a time. The financial strain this can put on a homeowner could be devastating. If it’s finally reached that stage where you’re starting to think you’ll never sell your house but are in desperate need of an influx of cash then before you start working through the idea of the dreaded second mortgage. An injection of cash might be the lubrication answer you’re looking for to free the cogs of the home buying process.
If you’re a home owner then a loan is surprisingly easy to attain; however it’s important to shop around and make sure you’re getting the loan that you need and that it’s fair to both you and the lender. Figuring out exactly how much to borrow and how long you want to borrow it for is of course up to the individual and will depend on your specific circumstances but it’s suggested that you take as small a loan as is humanely possible. Make sure you budget to figure out exactly the maximum amount you can commit to repaying to the lenders, there are numerous online budget planners floating around the Internet that can help or of course you could just dust off that old scientific calculator you stole while the teacher wasn’t looking back in high school and tally it up yourself!
There are two main types of loan available in the UK to both the home owner and the renter; these are unsecured and secured. We will primarily be focusing on unsecured loans as they are generally more desirable for a multitude of reasons.
An unsecured loan will generally only be available to those with a decent credit rating and the amount available and the time frames are significantly reduced and less flexible. Of course the major positive of an unsecured loan is that you essentially have nothing to lose but points on your credit rating as it won’t be secured against your assets and the ‘risk’ involved is on the lender. For this reason you’ll only be able to attain an unsecured loan if you have an impeccable credit history and are earning a decent wage but if you do meet this criteria then (as long as you don’t need to borrow in excess of around £20,000) an unsecured loan is definitely recommended. Unsecured loans last on average between 5 and 10 years and whilst it’s not technically required for the loanee to be a home owner, lenders are far more likely to grant a loan to a home owner over a renter for obvious reasons. Possible lenders obviously include high street banks and building societies but there are also specialist lenders to consider, who might be more willing to arrange unsecured loans for specialist loanees such as the self-employed or students.
Because there are very few requirements for arranging security, a home owner can usually get an unsecured loan cleared and made available within 48 hours. The terms and conditions of the loan will depend very much on your specific situation and will generally allow for smaller amounts and require a higher interest rate than a secured loan. They are generally repaid monthly although there are exceptions and many lenders (specialist lenders especially) might allow for ‘payment holidays’ (a break from your repayments) or early repayments should you suddenly come into a windfall (you always said you’d win the lottery ‘one of these days’ right?). Remember however that whilst the idea of an unsecured loan might sound wonderful, you should always remain vigilant in making payments on time as failure to do so could very well land you in court!
A secured loan is probably the most popular as it’s far easier to attain but it doesn’t come without its drawbacks. The ‘security’ belongs completely to the lender as you will be required to put up your home as collateral should you fail to make the successive, agreed upon payments. The APR however is generally more forgiving and the term of the loan can be significantly longer, in many cases up to 20 years! The only reason any sane home owner with a steady wage and a decent credit history would choose a secured loan over an unsecured one is if they required a larger amount of money (up to £75,000) or were feeling particularly masochistic.
Image courtesy of renjith krishnan / FreeDigitalPhotos.net