Secured loans: the top 3 suppliers right now

June 9th, 2023
Secured loans: the top 3 suppliers right now

All of us will experience turbulent times in our lives, many of which will be easier to navigate with some financial support. But did you know that loans are now a fundamental aspect of every positive financial management plan and can make good financial sense in a variety of different situations and circumstances?

There are several different types of loan available but if a personal loan or increased credit card balance aren’t options for you, a secured loan could provide the support you need precisely when you need it.

What is a secured loan?

A secured loan allows you to borrow money by naming a valuable asset as collateral. Secured loans are used as financial tools for a range of reasons including debt consolidation, accessing funds to start a business, and investing in property renovations to increase the value of your home.

Secured loans are a popular form of borrowing for all parties involved. As secured loans aren’t as risky for lenders as unsecured loans, it is usually possible for borrowers to access a larger amount of money at a lower rate of interest. However, no financial product is flawless which means it is imperative to ensure that you have properly weighed up all your options before deciding whether this route is right for you.

As with all loans, borrowers are required to make monthly repayments which will include interest. If you fail to maintain these monthly repayments, the asset you named as collateral is at risk and could be repossessed by your lender.

What are the advantages of secured loans?

To ensure that you are always making the most informed financial decisions, it is imperative to understand both the pros and cons of the products you are considering. There are numerous advantages of choosing a secured loan, including:

1. Reduced interest rates

Most loans come with a high rate of interest, which is ultimately designed to protect the lender because they are often approving loans based on credit reports alone.

However, as an asset with value is placed as collateral within a secured loan agreement, lenders aren’t at as much risk and therefore don’t need to charge such high interest rates. This is why secured loan borrowers typically experience lower monthly repayment costs than borrowers with an unsecured loan.

2. Access to larger loans

As lenders aren’t taking as big a risk when lending against a valuable asset, they are typically more willing to lend larger sums of money to borrowers. This makes secured loans a popular option for people in a range of different financial circumstances.

3. More generous repayment terms

Secured loans often have greater flexibility when it comes to repayment terms, which means you may have more time to repay your loan before any penalties come into play. This flexibility also means that you will find it much more straightforward to manage your day-to-day personal finances, as your outgoings won’t be as high as they would be with an unsecured loan product.

4. Boost your credit score

Although secured loans are popular amongst people with a range of credit scores, they are especially popular amongst those who can’t take out an unsecured loan because of their low credit scores.

Because you will have the opportunity to demonstrate that lenders can trust you to repay large amounts of credit on time, secured loans can actually increase your credit score over the long term. Of course, this will only be the case if you make regular monthly repayments and stick to the terms of your loan agreement.

What are the disadvantages of secured loans?

Although secured loans can have numerous advantages, no financial product is perfect for everyone and there are also some disadvantages that need to be understood before signing on the dotted line:

1. Collateral is at risk

If you fail to make regular repayments on your loan, the asset you placed as collateral is at risk of repossession. So, not only could you experience severe consequences financially, but you may also lose your home if that is the asset you have used to secure your loan.

It is worth highlighting here that lenders do work with customers who are struggling to make consistent repayments. However, the potential loss of a valuable asset is something you must think very carefully about before taking out a secured loan.

2. Increased fees

Although interest rates are typically lower with secured loans, lenders often charge higher fees on their secured loan products in comparison to their unsecured loan products. These extra fees exist because lenders will want to obtain an accurate valuation on the collateral being placed against a secured loan.

Different lenders will charge different fees, so it’s worth shopping around to secure the best deal for your circumstances. Additionally, you may be able to negotiate with your preferred lender to minimise these extra fees. However, it is important to be aware that these fees exist and to factor this cost into your decision-making process.

3. Credit score damage

Yes, secured loans can help you to improve your credit score, but they could also harm it in the short term.

Every time you apply for a secured loan, your lender will check your credit score to determine how much money could be available to you. If you’re approved, it will appear on your credit report in the form of a new account. This may cause your overall credit score to decrease because your score takes into account how long your credit accounts have been open. Many borrowers will see their credit scores bounce back relatively quickly and may even see an improvement over the long term.

However, your credit score may continue to drop if you fail to make regular loan repayments which will have further negative consequences on your overall financial health.

4. Early repayment fees

While it seems reasonable to assume that lenders want to recoup their money as quickly as possible, many will charge early repayment fees to ensure that they aren’t missing out on recouping the level of interest you were due to pay over the course of your loan’s term.

Secured loans shouldn’t be open for any longer than necessary. However, it is important to factor in these early repayment fees when deciding whether to clear your debt before the end of your term.

What is a secured loan against property?

Secured loans can be taken out against a variety of valuable assets including vehicles, jewellery, and art. However, equity in a property is the most common asset used as security, which is why this type of borrowing is also often called a homeowner or a property secured loan.

Can I get a secured loan with bad credit?

Yes, it may be possible for you to secure a secured loan even with a less-than-perfect credit score.

It is worth noting that the interest rates and repayment terms may be more rigid than for borrowers with a higher credit score. There are, however, lenders out there who actively specialise in financial products for borrowers with lower credit scores, and these could be worth exploring.

How do I take out a secured loan?

If you have weighed up the pros and cons and decided that a secured loan is the best option for you, here are some things to keep in mind:

1. Understand your needs

It is always best to fully evaluate your needs before taking out a financial product of any type. When it comes to secured loans, begin by asking yourself how much you need to borrow because this will have a significant impact on the amount of money you will need to repay every month. Be realistic and don’t overstretch yourself financially.

2. Shop around

With so many lenders out there, it can be tempting to simply go with the one that offers a great-sounding deal. However, the only way to determine whether you’re getting the best deal is to shop around and consider all your options. Use Free Price Compare to do a secured loan comparison.

There are a variety of different things you’ll want to keep in mind here, the most important of which include interest rates, repayment terms, extra fees, and lender reputation. We recommend using a secured loan calculator to gain a general idea of how much you could borrow based on your current financial circumstances.

3. Choose the right lender

It is often helpful to create a shortlist from your list of potential lenders, featuring those offering the most competitive interest rates and reasonable repayment terms. Always take time to properly consider your options and make sure to select the best lender for your needs.

What is the best secured loan right now?

Lenders can and do change the fees and interest rates they charge based on the unique circumstances of those who are applying for a loan. So, you will need to obtain a direct quote from your preferred lender to accurately determine the size of your monthly repayment terms and whether any fees will apply.

With that said, here are a few UK lenders offering secured loans right now:

1. Norton Finance

Depending on your financial circumstances, you could borrow between £3,000 and £250,000 from Norton Finance, with a repayment term between one and 25 years. Norton Finance offers more than 600 different products, which reflects its desire to match each borrower with the right product. In addition, they have flexible criteria so borrowers with poor credit scores could still be eligible.

It is important to note that Norton Finance does charge broker and product fees, which will be added as a percentage to the total amount of the loan value. Its standard secured loan products carry a 12.5% broker fee charge, which must be properly considered in advance to determine its financial viability for you.

2. United Trust Bank

United Trust Bank maintains a focus on second charge mortgages, which are loans secured against the value of a percentage of your home as opposed to the outstanding balance on your mortgage.

United Trust Bank offers both variable and fixed-rate loans, which provides an additional layer of flexibility for borrowers to accurately budget their finances accordingly.

3. Paragon Bank

Borrowers taking out a secured homeowner loan from Paragon Bank could borrow between £20,000 and £500,000, depending on the value of the property and its outstanding mortgage. Repayment terms range between five and 30 years, and the exact repayment term you will receive is dependent on your personal needs and circumstances.

Paragon Bank offers a few different interest rate options including fixed rates over a term of between two and five years.

How to responsibly manage a secured loan

Keeping on top of your finances is essential, especially when you need to manage loan repayments in addition to the rest of your monthly outgoings. Here are some suggestions that might help:

1. Establish a budget

Creating a budget is the best way to ensure you’re maximising your income, as you will be able to see where your money is going and whether there are areas in which you can make cutbacks. Remember to allocate a portion of your income to loan repayments to ensure the asset you placed as collateral against your loan is safe.

2. Set repayment reminders

If you don’t want to set up automatic payments, ensure that you set monthly repayment reminders. Don’t forget, late payments can both incur late fees and also have a hugely negative impact on your credit score, so it is vital to remind yourself in good time whenever an upcoming payment is due.

3. Meet with a financial advisor

If you’re struggling to manage your finances, contact a financial advisor for help and support. There are qualified people out there with the knowledge and skills to help you to make the positive changes that will put you back in control of your finances.

4. Consider making overpayments

If your lender isn’t going to penalise you for making overpayments, this option will allow you to repay your loan early and minimise the interest incurred on the sum you have borrowed. Don’t feel obliged to make overpayments every month but do think about putting more money towards repaying your loan whenever possible.

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