Have you heard of a secured loan before? It is a loan that uses an asset as collateral. This means the lender can take the asset you nominate if you can’t repay the loan. If you face a lot of credit card debt after the holidays, a secured loan can be a good way to consolidate the debt into one easy repayment. Secured loans may allow borrowers to enjoy lower interest rates, presenting a lower risk to lenders.
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Secured loans are loans secured by a specific form of collateral. Including physical assets, such as property and vehicles, or liquid assets, such as cash.
Personal and business loans can be secured. However, a secured business loan may also require a personal guarantee. Banks, credit unions, and online lenders can offer secured personal and business loans to qualified borrowers. The interest rates, fees, and loan terms can vary widely for secured loans, depending on the lender.
For example, getting a mortgage is a loan secured by the property you're buying. Likewise, a car loan. If you default on the loan and stop making payments, the lender can seize the collateral to secure the loan.
When comparing secured loans, there are some important things to remember.
• What type of collateral is required to secure the loan
• The interest rate and annual percentage rate (APR) for the loan
• Whether the loan interest rate is fixed or variable
• Any fees the lender charges, such as origination fees or prepayment penalties
• Minimum and maximum loan amounts
• Credit score and income requirements for the loan
Call us directly so we can go through these with you in detail.
Do I have to have a relationship with a bank to get a secured loan? It depends on the type of secured loan. They can be found at banks or online lenders. If you're applying for a share-secured or savings-secured loan, you must have an account. But if you're applying for a business loan, home mortgage, or auto loan, you may be able to apply even without an account. You may find better interest rates at a bank where you already have accounts.
Secured loans can often come with lower interest rates since they are less risky for lenders. But remember that if you cannot afford your loan and default, you will lose whatever asset you used to secure the loan. Assess whether a potential loan fits your budget before borrowing. Contact us for more information.
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Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. A fee may be charged for mortgage advice. The exact amount will depend on your circumstances.