Why a Homeowner Loan?
When it comes to loans, the lending industry has a variety of types you can choose from. There are secured and unsecured loans then there are more choices under the two categories. Under the unsecured loans, payday loans seem to be the most popular for those needing quick cash. Under the secured loans, your choices generally include logbook loans and homeowner loans. Of the two, homeowner loans are more popular with borrowers because of its various advantages.
Easy to Qualify
Homeowner loans are easier to qualify for since it is secured against an asset. Banks and major lenders are more willing to loan you the amount you need because this type of loan is also considered as a "safe" loan. The house serves as collateral which reduces the risks for lenders hence approval is more likely guaranteed even for those with bad credit history. As long as you own your home and you can provide proof of a steady source of income, you shouldn't have a hard a time nabbing a good homeowner loan deal.
Though it’s immensely easy to avail, it would still help if you know more about loan before applying for one. For more basic information and guidelines about the financial product, you can head over to Money Facts Co UK.
Lower Interest Rates
Compared with logbook loans, homeowner loans are the cheaper options. If the average APR for logbook loans falls at about 400%, homeowner loans only charge about 5% up to 8% annually. Just looking at the percentages, you'd see immediately which one is a more cost-effective way to raise funds.
To illustrate how interest rates work for a homeowner loan, here's one example. If you borrow £20,000 against your home at 5% Representative APR and 4.9% variable pa over 10 years, your monthly due will be somewhere at £211 totaling £25,445 upon end of term.
Larger Loan Amount
Not only does homeowner loans have lower interest rates but it also offers larger loan amounts. Compared with logbook loans which can only lend you up to £50,000, a loan against your home can allow you to borrow up to £250,000 or more depending on the equity of the property.
For many lenders, the minimum amount is £10,000 which is the kind of amount you can't easily avail with other types of loan.
Longer Repayment Term
Since the loan amounts are more flexible and larger, it follows that the loan term is also longer. With logbook loans, terms typically run for 78 weeks or up to 3 years. With homeowner loans, 3 years is just the minimum term. Depending on the amount of money borrowed, you can tailor the term accordingly. It can be 5, 10, 15 or even 25 years. The choice is completely up to you.
Seeing the benefits of a homeowner loan, it’s no surprise that it is widely available and highly demanded in UK. But just the same, you need to keep in mind that there are also drawbacks to the loan. At the top of the list is the possibility to lose your home. Upon missed repayments or default, your lender may be forced to repossess your home to cover for the outstanding balance. To avoid that from happening, it’s very important that you stay a responsible borrower until the loan has been fully paid off.