Secured loans are availed by placing an asset as collateral, which serves as a security against the loan amount. That is, in the event of repeated defaults or non-payment - unintentional, incidental, or deliberate - the lender can seize the pledges collateral to recover his money. Hence, borrowers must pay the monthly instalments (EMI's) as decided.
According to the latest market report, majority of the applicants in March 2007 wanted secured loans for amounts between £10,000 and £25,000. One third of the remaining applications were for amounts below £10,000 and one fifth for amounts above £25,000. The average amount requested in March 2007 was £22,514 - up by 2.3% since February 2007.
Besides, the risk of collateral seizure, secured loans has the following two drawbacks too:
This loan type can only be availed by people who are capable and willing to pledge collateral, i.e., homeowners and property owners
The inseparable property evaluation procedure increases the overall paperwork and the loan approval time
Features of secured loans
Secured deals are very safe for the lenders. Hence, the loan requests get quick attention along with other benefits. Generally, secured credit has:
An amount range of £25,000 to £250,000
An interest rate range starting from 6.7%
A repayment term range of 5 to 25 years
The payback term in secured loans is usually long. Hence, the borrower gets the liberty to select the desired:
Rate plan - fixed, variable, discounted, capped or variable
Repayment method - capital, interest or partly interest and partly capital
Borrowers can opt for a different rate plan and/or repayment method - subject to the creditors lending policies.
In addition, lenders are usually open to discussions. Hence, borrowers can negotiate for flexible loan terms and conditions like deferred payment up to 6 months, repayment holiday and accelerated repayment.
The author is a business writer specializing in finance and credit products and has written authoritative articles about secured loans, personal loans . He has done his masters in business administration and is currently assisting Shakespearefinance as a finance specialist.
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