Karan Goyal's Web World

Monday, February 16, 2004

Secured Loans

Secured loans enable homeowners to borrow capital and offset some of the risk against the value their property. On a practical level this means that anyone taking out a secured loan is effectively using their property to guarantee the loan. Of course if the borrower continually falters with repayments the consequences could be disastrous. On the other hand; secured loans have a number of distinct benefits over other types of borrowing. Lower risk means that banks and building societies can pass-on some of their savings (made on insurance etc) by offering much better interest rates to property owners. However, attractive Annual Percentage Rates aren't all they have got to offer. Today secured loans come with all sorts of flexible repayment terms, so its' important to read the small print. Clauses to keep an eye out for include: ‘payment holidays' whereby you can halt repayments for an agreed period of time in order to divert capital elsewhere (say to help with the costs of a wedding or newborn child) and favourable redemption charges - so you won't be stung if you want to pay the loan back early.