We have 2 kinds of loans! Secured Loans and Unsecured Loans. Secured loans are are types of loan where the borrower will need to pledge some of its assets like a car or personal properties as collateral for the loan. While the unsecured loan or the unsecured personal loan is the one which the borrower does not require any security or collateral that is to be assured to the loan lender.
In another word, a secured loan is when the potential borrower would have to secure a guarantee or security against which the loan lender will lend money. A secured loan is the better choices among the 2 because it comes with many large and small benefits like lower interest rates, but the borrower will need to put one of its valuable assets as collateral. But the borrower can easily avail homeowner loans without using properties as a mortgage.
What is an unsecured personal loan for homeowners
The homeowner loan can be taken by those who have a home in their name. With an unsecured homeowner loan, people can get a loan for a certain amount of the total value of the property without having to guarantee their property to the lender. The borrower must be above 18 years of age and also have a regular income source for being eligible for the unsecured personal loan.
How does an unsecured personal loan work?
The unsecured personal loan for a homeowner comes with certain benefits, which are beneficial for the debtors. The loan borrower who has taken the loan has to repay it along with the interest charge in monthly instalments.
The interested party should check the availability of the loan along with the market conditions before taking out the loan. The loan borrower should also make sure that he/she can pay off the loan every month. Loans can be requested on different types of property like flats, bungalows, cottages, houses, etc.
Some of the things that the loan lender usually takes into consideration are the age of the applicant, the unsecured personal loan term they can pay for, the value of the property, the income of the applicant and their credit record.
Also, the rate of interest for the loan is either fixed or a floating rate of interest depending on the lender. Variable-rates of interest can be a bit expensive as compared to the fixed rate of interest in which the repayment instalments remain the same throughout the tenure of the loan.
Some of the important features of the unsecured personal loan for homeowner in the UK
The value of the loan will be a certain percentage value of the entire property which is negotiable in terms.
- The tenure of the loan will be stretched from 1 year to 7 years, depending on the value of the loan.
- The interest rate is either fixed or floating.
- There will be a thorough affordability check considering income and credit score, and then a determination of eligibility of the loan.
Usually, there will be certain loan lenders who might take a certain amount as fees for finalizing the loan. Research can be done before selecting the lender who is not charging any extra fees.
Some of the fees which are included in the unsecured loan are:
- Legal Fees
- Broker Fees
- Disbursement Fees
- Valuation Fees
After a lender and loan have been selected, several steps are to be completed before the unsecured personal loan is finalized. Usually, these steps can take 4-5 weeks, after which the loan amount will be transferred to the debtor’s account.
- The lender will check the credit record and make sure that the loan can be paid.
- The lender will then check the current pay stubs to determine an income’s regularity.
- They will then check the registry of the house to confirm the ownership.
- Lastly, they will calculate the property’s value and equity before finalizing the loan amount.
After the unsecured personal loan is granted, the monthly EMI’s of the loan will need to be paid. If you are paying off the loan early, a certain early redemption or repayment charge would be administered. Homeowners can also make a payment holiday with the lender’s approval, but in such cases, the cost of the loan will increase.
Why should people apply for the unsecured personal loans?
Some of the reasons why homeowners take loans are mentioned below:
- Funding: The money that you receive can be used to fund a large expense or a smaller one, depending on your needs. Also, you can use it for your wedding expenses or fund your dream holiday.
- Business: They can start a business with their loan and invest in it with the amount. This will make the repayment of the unsecured personal loan easier because the returns can be used from the business to repay the loan and can also successfully secure the future of your business by investing in it.
- Home improvement: Renovations and improvements can be made in the home because usually, these renovations are expensive. To increase the value of the home, timely renovations and improvements can be very helpful to enhance the overall property value.
How to select an unsecured personal loan for a homeowner?
Searching for the right kind of loan can be difficult as there are many options to choose from. Some of the steps that should be taken while choosing an unsecured personal loan are:
- First, decide the amount to be borrowed for this loan.
- The next step is to calculate the value of the property according to the current real estate trend and by calculating the mortgage value that is still outstanding.
- After this, decide the number of instalments that can be paid every month and according to that, decide the term of the loan.
- Next, keep records like house registry, credit report, etc. available because these are needed by the lender to make their decision.
- Lastly, talk to a broker for getting a market viable homeowner loan on the property/
In a competitive market, the expenses are high and thus at times taking an unsecured personal loan for homeowners becomes inevitable. People can get an unsecured loan for the value of their property without any guarantee, making the process of loans for homeowners much easier and less complex.
For more detailed information, you can visit the 786 loans website, a registered trading name of Tiger Lion Financial Limited. Tiger Lion Financial Limited is authorised and regulated by the Financial Conduct Authority in the UK. the 786 loans authorised loan broker operating in Nottingham, Bristol, London, and all other major cities across the UK. The loan company offer a wide range of other credit products.
You can also visit the Monet Advice Service website, where you will learn more about guidance across a wide range of money matters, including a number of useful tools and calculators to help people manage their money. Their focus is on supporting people who can benefit the most from their help or who are going through significant life events such as
- Saving for a home
- Dealing with the breakdown of a long-term relationship
- Starting a family
Monet Advice Service is the largest single funder of debt advice in the UK. The company is also responsible for driving higher-quality and more consistent debt advice services across the UK including those they do not fund directly.
The aim of the loan company is to make sure people get the help they need to deal with their creditors and reduce their debt, and also the support to manage their money and build their financial resilience so they are less likely to get into difficulties.
Culled from Ezine Articles | How Do Unsecured Homeowner Loans Work in the UK?
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