Published On: Sat, Jul 2nd, 2016

Consumer Borrowing: Why Secure Loans Are Proving A Hit Among Homeowners

Homeowners will usually have one large debt they have to pay: their mortgage. But, many homeowners earn far more money than they spend each month. Still, there will be some reasons why they have to take out a loan.

The financial market is full of lending options out there. From payday loans to unsecured ones, there’s an option out there to meet all needs. These days, homeowners are increasingly turning to secured loans for their borrowing. Especially if they guarantee financial stability when it comes to clearing existing debt.

So, why is that? Well, it seems those people prefer secure funding for the following reasons:

Secure Loans Are Proving A Hit Among Homeowners

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They can borrow larger sums

The majority of homeowners will take out secured loans for two reasons. The first is to pay off all their debts. And the second is to fund a building project such as a home extension.

One problem with unsecured borrowing is that it’s hard to take out loans for large sums. Secured loans offer a better alternative. That’s because there is a guarantee that the lender will get their money back.

They don’t have to worry about their credit score

Almost all lenders will carry out a creditworthiness check on borrowers. That’s because they want to lower the risk of non-paying customers down as much as possible. If your credit history has a sketchy past, it’s likely you will get declined for unsecured loans.

One of the advantages of secured lending is that borrowers don’t have to worry so much about that. And lenders can feel better about giving money to people that are a higher risk. Why? The answer is simple: they can get their money back from your home.

If you don’t repay your secured loan, the lender can force the sale of your home and get their money back that way. And it’s all perfectly legal to do so because that’s part of the loan terms.

Secure home Loans

Photo via Geograph

They can spread the repayments over a longer period

Unsecured loans usually range from twelve months to five years or so. Some lenders may even offer seven-year repayment options. But, what if a homeowner needs to borrow a significant sum of money? Repaying the loan in such a short period can often prove to be untenable.

Secured loans are attractive to homeowners because one can pay them off over a longer period. It’s not unheard of for borrowers to repay loans over ten or even twenty years. The repayments are low and at an affordable and manageable level. Plus, lenders will typically earn more interest over longer periods. Everyone wins in those scenarios!

They are better than credit cards

If a person has a good credit score, they can usually obtain credit cards with high balances. I’m talking about five or even six-figure sums, believe it or not!

The biggest disadvantage of borrowing on a credit card is the interest charges. With credit cards, interest gets compounded. That means you end up paying interest on top of previous interest charges added to your account! Secured loans have fixed interest fees, and they aren’t compounded.

It’s likely that the trend for secured lending will continue well into the future. Even during times of economic uncertainty.

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