Secured Vs. Unsecured Homeowner Loans

Secured Vs. Unsecured Homeowner Loans: Which One Should You Choose?

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There are millions of homeowners in the UK – people who either own their property outright or who are paying off a mortgage on their home or apartment. Being a homeowner is considered by many lenders to be a major advantage – after all, you’ve had to save up for a deposit in the past (and that’s not easily achieved given how expensive property is) and you’ve kept up the repayments on your mortgage every month.

The two major types of loan that homeowners apply for are secured and unsecured loans. In this article, the 786 Loans team explain:

  • what the difference between a secured homeowner loan and an unsecured homeowner loan is
  • the advantages and disadvantages of secured homeowner loans
  • the advantages and disadvantages of unsecured homeowner loans
  • what options are available for homeowners with bad credit
  • how to use 786 Loans if you choose an unsecured homeowner loan for bad credit applicants.

Homeowner loans – what are they?

Your mortgage, if you’re still paying one off, is the biggest type of secured loan that you will probably ever apply for. When you were applying for it, across the adverts and across the mortgage documentation, the following words would have appeared – “your home is at risk if you do not keep up repayments on a mortgage or any other loan secured on it.”

As you know, if you fail to pay your mortgage for an extended stretch of time and if you and your lender can’t come up with a repayment plan which is acceptable to both of you, your lender will repossess your property. They will then sell your property to pay off the outstanding amount on your loan. If there is anything left over, you’ll get that, however, if you’re in negative equity (where the value of your mortgage is greater than the value of your home), you’ll probably still owe your lender money once your home has been sold.

The same principle applies with secured loans or “second/third charge” loans. Assuming your mortgage provider allows a secured homeowner loan provider to take out another “charge” on your home, your home could be repossessed if you don’t keep up repayments on that loan and if you can’t agree a repayment plan with your lender.

It’s a big risk to take out a secured loan given the fact that your home is at stake if you hit financial problems at some time in the future. Before you take one out, you should be absolutely certain that, for the life of the loan, you’ll be able to meet each and every repayment on time and in full.

Despite the risks, there are advantages to taking out a secured loan. Because your lender can repossess your home, sell it, and recoup some or all of their money that you owe them through the sale, the interest rates you’ll pay will generally be lower than an unsecured homeowner loan. You’ll also be able to borrow more money with a secured loan and over a longer period.

Unsecured homeowner loans are generally for smaller amounts over a shorter period. However, despite the higher interest costs, you have peace of mind that, if you do hit financial troubles, your lender has no automatic right to repossess your property meaning greater security and peace of mind for you and your family.

Loans for homeowners with bad credit – what you need to know

Both secured homeowner loans and unsecured homeowner loans are available for applicants whose credit histories are less than perfect.

With both types of loan, you will pay a higher interest rate than applicants with a great credit history will pay. The amount of money you’ll be allowed to borrow if you have a poor credit history will also be lower as will the length of time you will have to pay the loan back over too.

Unlike many years ago when unsecured homeowner loans were only available to borrowers with the very highest credit scores and whose incomes were generally a lot higher than their expenses, there is much more choice available now for borrowers seeking homeowner loans.

One of the most important benefits that having as many unsecured homeowner loan companies as there are now has for borrowers is that the competition between lenders actually drives down the cost of your loan – the chances are that you’ll be paying a lot less taking out a loan now than if you’d tried to take one out a few years ago.

But, given that there are so many different competing unsecured homeowner loan providers on the market right now in 2019, how do you go about finding the very best deal for you and your family quickly?

Choosing an unsecured loan? Choose 786 Loans to help

If you want to choose an unsecured loan for you and your family, you should choose the 786 Loans’ service to find you the very best deal. We help borrowers find the right loans for homeowners with bad credit for which you don’t need to put up your home as security.

The way we work is simple but it’s very effective in giving power back to borrowers. We have a panel of Financial Conduct Authority-approved lenders, all of whom have told us the type of people they feel most happy lending money to.

When you fill in the application form on our website, our clever computer system matches the details you give us on your application form and the details contained on your credit report to match you with your ideal lender. Normally within seconds, we’ll show you everything you need to know about the loan we’ve found for you – including the level of interest, your monthly repayments, the length of your loan, and more.

If you like the deal we’ve secured for you, simply sign the online form and a relationship between you and your lender will be created. Remember, we’re a broker and not a lender so you don’t receive your money from us. If you don’t like the deal we found you, we’re sorry about that but please be assured that you’re under no obligation to accept any homeowner loan we’ve found you.

To start your application process, please click here.