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How to Use a Secured Loan
A secured loan can be the ideal way to borrow anything from a few thousand pounds right up to 6 figure sums, providing you have the capabilities to pay it back.
If you are a homeowner and need some extra cash, you could free up some of the equity nestled in your property with a secured loan.
Making the most of your loan:
- What are your options?
If a secured loan is the first loan you've considered it might not necessarily be the right loan for you. Before you go any further check out the range of loans on offer, to see if you would be better suited to any of the following...
- Unsecured loan
- Car finance loan
- Check out the competition
In order to get the best deal, it's imperative that you look at what's on offer from a variety of different lenders. The best deal for your neighbour may be a terrible deal for you!
Check out our secured loan comparison page to see what various companies are offering in terms of APR and incentives.
- Repayment period
Make sure you don't borrow more than you can afford to repay, and equally, don't try and repay too much at once.
Use our secured loan calculator to assess how much money you can afford to borrow and how long you realistically need to pay it all back.
Things to watch out for:
- Changes in the base rate
Whereas unsecured loans generally offer a fixed rate of interest for the loan period, secured loans will tend to change their rate in accordance with the Bank of England base rate.
This is because the loan repayment period is usually structured over a lot longer timeframe and, therefore, has to be flexible to ensure the bank makes the necessary return.
Base rate changes are part and parcel with any secured loan and rises in the Bank of England base rate are to be expected over time, but they can also rise sharply over a short space of time. Make sure you have flexibility in your budget to afford the repayments if this happens.
- Changes in your circumstances
Despite the improbability of the future and the difficulty in predicting it, it's vital to try and forecast any occurrences that may change your loan repayment abilities. Are you likely to come into money during the period of repayment? Is your job stable for the course of the payment period?
It's obvious that loosing your job is going to impact negatively on your loan repayments, however, you can also be penalised for trying to repay your loan too soon!
It may seem that repaying your loan before the deadline is what a bank would want, but unfortunately it isn't.
The longer you have the lenders money for the more interest they can accumulate, so if you try and pay back the agreed amount before the agreed time limit you will more than likely be charged what is known as a 'redemption penalty'.
Not all lenders do this, so if you feel you are likely to repay the amount early, see if you can find a lender that won't change you for doing so.
Compare secured loans
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