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Mortgages

The Benefits of a Second Mortgage or Secured Loan

Today, most banks and building societies have made changes to the way that they decide who they should give credit to. As regulations and rules become stricter, it can be far more difficult for people to get their hands on any kind of financial help – regardless of whether you’re applying for a mortgage or an automobile loan.
If you’re a homeowner, one thing you could consider if you need to borrow some money is a “secured loan”. These types of loans are designed to be secured against the full value of your home, so you will need to own your property completely, or have a mortgage on that property. Sometimes, secured loans may be referred to as second mortgages or homeowner loans.

The Benefits of Secured Loans

One of the biggest benefits of secured loans is that you can often borrow a larger amount because you are asking the company that lends you the money to take on a smaller risk. After all, in a secured loan, if you fail to pay back the money owed, then the bank or building society that gave you the money is within their rights to repossess your property to get the money that they are owed. For instance, many organisations will lend up to £100,000 on a secured loan, while unsecured loans are often for much smaller amounts.

Additionally, most providers of secured loans will also give you longer to pay back the debt owed. For a secured loan, it’s not unusual to have a term that lasts ten or even twenty years. In the case of mortgages, some loans are even provided for 35 to 40 years at a time. Of course, while a longer term means that your monthly repayments will be lower, you will end up paying more in interest over the course of your loan.

The Risk of Secured Loans

As beneficial as secured loans can be in some circumstances, it’s worth noting that they do come with a significant amount of risk. The reason that the bank or building society you choose will be willing to offer you so much money for such a long time is that you are giving them the security of knowing that if you don’t pay off the loan as you are supposed to, they will be able to take your home. This means that if you ever fall into financial hardships and you cannot make the repayments you need to make according to the rules of your loan, then you could lose your most valuable property.

It’s also worth keeping in mind that the rates that are offered on secured loans can also be variable. This means that the rate of interest that you pay could increase and decrease according to the criteria set in place by the lender or the current economic climate. Before you sign up for a loan you should check whether the rates you need to pay are variable and fixed, and factor that information into the calculations of whether you can afford a loan in the first place.

An Alternative Solution

One alternative option to a secured loan is to simply increase the amount of your existing mortgage on your property. Again, this option will only be possible if you already have some equity in your home. In most circumstances, you will be required to pay a different rate of interest on the new amount than you would on your primary mortgage, and you will also need to pay some set up fees.

Alternatively, you could consider switching to another lender so that you can take out a bigger mortgage. For instance, if you purchase a home whether £200,000 using a mortgage, you could switch to another bank and take out a bigger mortgage in order to pay for things like home improvements, or an extension to your home. Of course, in this case you would need to satisfy the lending criteria that your new bank or building society has put in place, and you may also need to pay for certain legal and set up costs too, but there’s always a chance that you could be better off this way, particularly if your new mortgage rate is lower.

Loans

What Are Home Improvement Loans?

If you’ve been dreaming about the prospect of making changes to your current home, then you may need to access some additional capital to make those dreams a reality. After all, though many of us wish for a time when we can upgrade our current kitchen or pay for an extension to support a growing family, most of us do not have the money required to make those changes ourselves.

Sometimes, a home improvement loan can be possible if you fit the right criteria for your local lenders. These loans can be accessed for a range of different purposes, regardless of whether you want to build an entirely new kitchen, or simply make your bathroom more modern.

Why Make Home Improvements?

If you can make an improvement to your home, then this process might not only make you feel more comfortable within your property, but also give you the chance to sell your property for a higher price when you decide that it may be time to move. For instance, a loft conversion or an extension that expands the floor space within a property often increases that home’s value. However, whether you will earn back more than the money it costs to do the improvement in the first place will depend on the market when you choose to sell.

Of course, the money required to fund such changes to your home has to come from somewhere, and few people have the right resources to be able to simply dip into savings and refurbish their home with new and appealing features. What’s more, even if you do have some savings stashed away, completely using your rainy day fund up may not be your preferred route.

If you urgently need some extra space and you can’t afford to wait any longer for the money that you need, then there are plenty of providers out there that can offer you unsecured personal loans that you can put towards your home improvement requirements. Importantly, these loans will come with interest payments, so you will need to think carefully about your financial situation and make sure that you can afford the monthly repayments before you agree to a loan.

What is an Unsecured Loan?

Otherwise known as a personal loan, an unsecured loan is usually taken out for a smaller amount of money than a secured loan, and for a shorter-term period. Unlike in secured loans where your borrowing will be secured against an asset, like a house or car, an unsecured loan provides no security to the lender, which means that you will often have to pay higher interest rates, but will not risk losing your home or property if you fail to make a payment on time.

Unsecured loans are given according to your credit history. Because the lender is not getting anything from you if you fail to make repayments, the chances are that you will find most lenders are far more stringent about the kind of credit score that you need to have in order to get an unsecured loan. Although some unsecured loans may be available for people with poor credit, most of the time they will come with extremely high interest rates which may not make them the best option for home improvement purposes.

If you have made payments in the past on time and do not have any negative spots on your credit history, then you should be able to shop around to find the best deal on your unsecured or personal loan. Remember to find out exactly how long you can get the loan for, and how much you will need to pay in APR in order to make repayments.

Remember, if you are not accepted for an unsecured loan, you should not attempt to keep applying for different loans from a range of lenders. Though it’s true that you can be successful with one lender even if you are unsuccessful with another, applying for too many loans in a short space of time can leave black marks on your credit history that cause banks and building societies to avoid you when you come to them asking for credit. A better option is to check your credit history beforehand and make sure that you are in the right standing to get a loan for your home improvements.

Employment

Can Unemployed People get Loans?

We all struggle with our finances from time to time. Even when you’re very good at saving and using money, you might find that issues suddenly arise that make it difficult for you to afford all the bills that you need to pay. If you are out of work for a short period of time, or suffering from unemployment, then you might find that you’re unable to pay the bills that you need to survive. In this case, you may consider taking out a loan to help you make ends meet. Unfortunately, a lot of lenders will be unwilling to give a loan to someone who doesn’t have a stable salary to prove that they will be able to make repayments.

Fortunately, there are still some options available out there for people in periods of unemployment. If you don’t have a job and you desperately need money, there are solutions that could help you to access the finance that you need.

Looking for Specialist Loans

In most cases, you will need to have a steady salary if you want to borrow money from mainstream lenders. However, there are a wide number of specialist providers out there that are now willing to give loans to the unemployed. If you’re without a job, this doesn’t necessarily mean that you can’t access cash in the right circumstances. However, in some cases there may be a range of factors in play that make it more difficult to access credit.

If you also suffer with a bad credit history, alongside unemployment, or you have every had a bankruptcy or county court judgement against your name, then this will make your attempt of applying for a loan far more difficult. However, being in a terrible situation financially doesn’t mean that all lenders will reject you. What it does mean however is that the loans you can get will often come with higher interest rates, and you will not have as many options available to you.

One of the best ways you can improve your chances of getting a loan while you are unemployed is to look for ways to boost your credit history. For instance, you may be able to do this by ensuring that your name is on the electoral role. Additionally, you should make sure that you space out any applications that you make for credit. Remember that every time you apply for a loan with a company you will make some mark on your file. If you are rejected from a loan, this means that the next lender will be able to see this rejection, and it could mean that they are less likely to accept you.

What Types of Loans Can You Get?

If you’re unemployed, then the chances are that you won’t be able to apply for the best loans available on the market, or those with small interest rates and great terms. Unfortuantely, these loans are often reserved for people who have pristine credit records and long-term employment that helps to limit their risk for the lenders.

However, there are some specialist lenders on the market that will give loans to people who appear to be a higher risk because of unemployment and poor credit histories. You will be able to compare the different options available in these loans the same way that you would with any other kind of loan and mortgage.

One very important thing to remember is that the greater of a risk your lender perceives you to be, the more interest you will need to pay to get your hands on a loan.
Unfortunately, it’s the people who need money the most that often face the most scrutiny from lenders. While you might need to pay hefty charges in interest, if you know for certain that you can make repayments on time, a loan should help you to prove that you are trustworthy as a borrower, and should therefore make sure that your credit history improves over time. Just make sure that you never take on a loan that you cannot afford to pay back, as this can lead to a spiral of debt that is very difficult to get out of.