Presence of collateral makes secured personal loans the most cost-effective transaction for all parties involved – lenders, as well as borrowers.
Secured personal loans can only be availed by placing an asset (like home) as collateral. In other words, this loan type can only be availed by people who are UK homeowners or property owners, over 18 years of age and willing to pledge collateral.
As lending is a business, creditors have to make sure, that they will get their money back – with profit. Hence, the approval of the application and the loan amount is usually in proportion to the loan seekers credit history (good, average or bad); debt to income ratio (current monetary position); employment status (future payback capacity); and the available equity in the pledged collateral.
The value of pledged collateral is of great importance in secured personal loans because in the event of repeated defaults – unintentional, incidental, or deliberate – or non-payment the lender can take over the pledged collateral and recover his money.
Depending upon the above-mentioned parameters, the lender categorises the loan seekers as prime customers (good credit holders), near prime customers (average credit holders) and sub-prime customers (bad credit holders).
The sub-prime customers are further categorised as low adverse credit customers; medium adverse credit customers or high adverse credit customers – to get a better idea of the hazards that these customers may pose.
Once the borrowers past, present and future credibility is established and categorised, the lenders approve the loan application and finalise the secured loan deal.
Please note: Borrowers must gather, compare and analyse the quotes thoroughly, as interest rates on secured personal loans vary greatly from lender to lender – mainly on the basis of the:
- Past, present and future credibility of the borrower
- Available equity in the pledged collateral
- Desired loan amount and payback duration
- Chosen rate plan and repayment method
Generally,
secured personal loans ensures quick attention, high credit range (as high as £250,000), low interest rates (as low as 6.7%), variety of rate plans (fixed, variable, discounted or capped) and diverse repayment methods (capital, interest or partly interest and partly capital).
Also, lenders are usually open to discussions in secured deals. So, borrowers can negotiate for flexible loan clauses like deferred payment up to six months, repayment holiday and accelerated repayment.
The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry.He has done her masters in Business Administration and is currently assisting Chance4finance as a finance specialist. To find a
secured loans , that best suits your needs, visit
http://www.chance4finance.co.uk
