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Secured Loans - How to Get a Good Deal
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Mack Chandler
Jul 13, 2009, 7:55:24 PM7/13/09
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Secured loans are loans in which the borrower pledges an asset as
collateral for the loan, which then becomes the secured debt owed to
the creditor, who then gives the loan. Secured loans are normally
secured against property.
This debt is thus secured against collateral. In case the borrower
defaults, the creditor can then take possession of the asset used as
the collateral. The asset is then sold to repay the remaining debt.
A second charge loan can be a good way of raising finance instead of a
remortgage, you may be locked into a competitive rate and would pay a
penalty to leave your current lender.
A secured loan provides benefits to both the debtor as well as the
creditor. From the creditor's point of view, he/she is relieved of
most of the financial risks involved because it allows him/her to take
the property in the event the debt is not properly repaid. For the
debtor, it permits the purpose where he/she may receive loans on more
favourable terms i.e. lower interest rates and more flexible repayment
periods.
There a few guidelines to follow before fixing a secured loan deal.
Interest rates on the loans form a very significant concern. The
interest is the surcharge the borrower is paying to the lender that is
over and above the principal amount borrowed. The borrower must shop
around very carefully and vigilantly for the best possible interest
rate. The lower the interest rate, the lower would be the overall cost
of the loan.
Also the APR (the Annual Percentage Rate), should be considered. The
APR combines the interest rate with other loan charges and
fees, expressing this combined figure as an annual rate. The lower the
rate, the better it is for the borrower. Again as in the case with the
interest rate, the borrower must compare APRs too.
It is also very imperative to see that borrower doesn't default on the
secured loan. Not only does the borrower lose possession of his/her
assets, but also his/her credit score falls dramatically and future
credit approvals get jeopardized.
collateral for the loan, which then becomes the secured debt owed to
the creditor, who then gives the loan. Secured loans are normally
secured against property.
This debt is thus secured against collateral. In case the borrower
defaults, the creditor can then take possession of the asset used as
the collateral. The asset is then sold to repay the remaining debt.
A second charge loan can be a good way of raising finance instead of a
remortgage, you may be locked into a competitive rate and would pay a
penalty to leave your current lender.
A secured loan provides benefits to both the debtor as well as the
creditor. From the creditor's point of view, he/she is relieved of
most of the financial risks involved because it allows him/her to take
the property in the event the debt is not properly repaid. For the
debtor, it permits the purpose where he/she may receive loans on more
favourable terms i.e. lower interest rates and more flexible repayment
periods.
There a few guidelines to follow before fixing a secured loan deal.
Interest rates on the loans form a very significant concern. The
interest is the surcharge the borrower is paying to the lender that is
over and above the principal amount borrowed. The borrower must shop
around very carefully and vigilantly for the best possible interest
rate. The lower the interest rate, the lower would be the overall cost
of the loan.
Also the APR (the Annual Percentage Rate), should be considered. The
APR combines the interest rate with other loan charges and
fees, expressing this combined figure as an annual rate. The lower the
rate, the better it is for the borrower. Again as in the case with the
interest rate, the borrower must compare APRs too.
It is also very imperative to see that borrower doesn't default on the
secured loan. Not only does the borrower lose possession of his/her
assets, but also his/her credit score falls dramatically and future
credit approvals get jeopardized.
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