The Good, The Bad And The Ugly: Secured Loans – Are Home Loans A Good Option For You?
Secured loans – It isn’t as easy to get a loan as it once was.The terms of the loans that are available are so tough that getting a loan is not affordable. However, in case you own your home, then getting loans with decent loan repayment terms may still be available to you.
Low Interest Rates: The home loans are secured loans, which the lenders provide against your equity in the home. In layman’s terms, home secured loans use the ownership of your home as collateral for the loan.If you consistently fail to make the payments on the loan, the lender has a claim to the ownership of your home.If you make the payments on the loan, you benefit from good credit.
Since the lender has your home as collateral, these loans are less riskier than the unsecured loans.This low risk allows the lenders to provide you loans at competitive loan terms.The lender always has the option to sell the home and get some part of his initial money back, even if you lose your job and are unable to pay back the installments on time.
However, this is the worst-case scenario, and definitely not, what you would want to happen. The extra security in a secured loan is why home loans often have APRs that are 1/3 of what you can get for an unsecured personal loan.The bottom line is that you end up paying back a far smaller amount of money.
Larger Loan Amounts: If you take the home secured loan, you will also be eligible for a loan amount that is much larger as compared to what you could get for a personal unsecured loan.If you’re an average person, the most valuable thing you’ll ever own is your home.Lenders know that the loan is not just secured with equity, but that the home you provide as collateral is worth a lot to you personally.
Hence, you would not want to lose the ownership of your home as far as possible.To the lender, this means you will try very hard to make your payments consistent and on time. It is also very important to check the amount of money you can borrow, when you take a loan for getting a college degree or a medical emergency.Many people go the extra step and borrow enough to pay off all other debts.Their debt is then consolidated into a single home secured loan at a very reasonable interest rate and monthly payment.This consolidation also reduces the hassles of the other lenders, and as long as the home loan installment is paid, there is no debtor left, and thus the expenses become more manageable.
There are a variety of other loan types you can obtain, but few come with such positive aspects and favorable repayment terms compared to home loans.Most of the other good options are government subsidized or government guaranteed loans, however, there are many requirements to be eligible for these loans.So if you need to get an affordable loan to get your finances in order, you’ll want to consider a home loan.