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An Introduction to Homeowner Loans: the Key to Cash in Your House

These days it’s difficult to get by without some form of financial

assistance – most of us have loans, mortgages, credit cards,

store cards or other types of debt. Taking out a individual loan is one

of the most common and convenient ways in which to borrow money. There

are two main types – unsecured or secured. Unsecured loans are loans

without any form of security tied to them as a assure of repayment,

whereas secured loans are assured by some form of security to

safeguard the lender in case of non repayment. Normally the security

used in such loans is your house – whether you own it outright or have

a mortgage on it. (Loans secured against a house that already has a mortgage tied to it are known as 2nd charges, and loans secured against a house that is

fully possessed are known as very first charges.)

Homeowners therefore have a real advantage when it comes to borrowing

money, as wielding property provides fine potential for freeing up capital for private use. Homeowner loans, as they are often known, permit you to use the equity available in your house to borrow money.

(Equity means the value of your home minus any outstanding debts

secured on it, such as a mortgage.) They have many benefits:

  • Equity is the key to unlocking large sums of cash from the

    value of your property. Homeowner loans permit a much higher amount of

    lending over a longer period than unsecured loans, as they are assured against the value of your property and are therefore

    considered less of a risk to the lender than an unsecured loan. Even if

    you have negative equity (i.e. your mortgage or debt is higher than the value of your home) it’s often possible to get a homeowner loan, as many lenders will lend up to 120% of the value of the property.
  • For the same reason, homeowner loans tend to have a lower rate of interest than unsecured loans. This means lower, more affordable monthly repayments than an unsecured loan.
  • As with any other individual loan, the money is yours to spend in

    whichever way you want. You might want to make some home improvements,

    purchase land, use the capital to begin up a business, buy a car, go on holiday

    or consolidate debts or loans.
  • Some people have problems, often because of poor credit

    history. However, as homeowner loans are secured and provide a assure to the lender, people who have previously been incapable to qualify for an
  • often find it much lighter to get a secured loan, thereby providing them access to borrowing that they could not otherwise have obtained.
  • Homeowner loans can also

    be as supple as you want them to be. At the outset you’ll discuss and

    agree with the lender what terms and conditions best suit your needs.

    Typical repayment terms may be anything from three to 25 years,

    normally paid in monthly instalments, and loan amounts tend to range

    from £Two,000 to £60,000. Interest will be charged on the

    amount that you borrow, which is known as the APR or annual percentage

    rate. The specific details of your loan – the amount, interest rate and

    repayment term – will be calculated based on the equity available in

    your property (which will need to be valued), your private financial

    status and credit history and the lender’s confidence in your capability

    to repay.

    Research the cost of your loan cautiously before you sign up to

    anything. As with any other purchase, it’s essential to do a bit of

    research and shop around until you get the best deal. You may find that

    the interest rates seem to vary considerably from lender to lender.

    However, beware of how the APR is advertised – different companies

    calculate their APR in different ways, and often display their monthly

    rates more prominently than the APR, so it’s not always effortless to

    compare. (Monthly rates can be cheaper than the APR, which is very

    misleading.) For each product, find out what the APR is and how it is

    calculated so that you understand exactly how much the monthly

    repayments will be and how much you’ll be repaying in total. This will

    enable you to compare like for like inbetween products.

    Charges and penalties can make a big difference to the cost of the

    loan. Many policies penalise early repayment, and others contain hidden

    fees and charges. Always read the puny print and ensure that you

    understand the terms and conditions exactly. Ask the lender to explain

    any areas that you’re unassured about before you commit to anything.

    Another useful peak to bear in mind is that the shorter the repayment

    term, the less interest you’ll be paying and therefore the lower the

    total cost will be to you. It’s therefore best to find the shortest

    term that you can manage.

    Reminisce that it’s not just traditional banks, building societies and mortgage lenders who sell

    financial products.

    Nowadays there are many other types of lender in the market providing

    competitive deals at competitive prices. You’ll most likely find that

    supermarkets and online providers suggest the best value for money.

    Most importantly, weigh up the risks and benefits of using your home as

    security for a loan to ensure it’s the right thing for you. On the entire, homeowner loans

    suggest much better value for money than unsecured loans and are very convenient for

    people who are incapable to qualify for an unsecured loan. However, before

    you proceed, you should analyse your individual finances, work out your

    budget and be certain that you’ll be able to keep up the repayments,

    otherwise you could end up losing your home.-

    your property is the key to When you’ve considered all these significant

    factors relating to homeowner loans and looked

    around for a suitable product, you can be sure that you’ll be getting a

    better deal with a homeowner loan than you would be with an unsecured individual loanraising

    the cash you need in an affordable way.

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