Reasons for a Secured Loan or Homeowner Loan
As our circumstances change it's natural that we want to alter our living space to match our current needs and individual taste. You might yearn to completely refurbish your home and taking out a secured home loan may be the only way to achieve this.
If you've owned a property during recent house price growth then you'll have made substantial equity gains. When it comes time to get married and celebrate the marriage in style then the necessary funds might not be immediately available from salaries or savings.
According to Brides magazine, 12% of UK couples take out a loan for a wedding. A secured loan can mean one-off expenses, like a wedding, can be funded without having to wait until all the money has been saved.
When the funding is in place the couple can relax and avoid a distracting penny-pinching attitude to the event, and concentrate on making their big day really, really special.
Sometimes people secure a loan on their home to buy another property they wish to develop, known as a 'Buy-To-Let'.
In the UK, people get inspired by TV programs on property developing, such as 'Property Ladder' and want to have their own development. There's the potential for making lots of money, certainly enough to maintain outstanding loans and make a profit.
Setting up in Business
Perhaps you have a great business idea and want to branch out in a new venture? Borrowing money against your home can turn your business dream into a reality.
Sometimes there are once-in-lifetime opportunities where we have to boldly seize the moment, live for today and take a really exotic holiday.
The destination might not be there in the future due to global warming; the close relative in Australia we've not seen in years; a one-off much needed break between jobs and contracts.
Sometimes waiting until we're old, retired and rich isn't the wisest choice because we'll be too old, too retired and too rich to fully enjoy that type of more adventurous holiday.
Cars & Prams
Or perhaps, for work reasons it's essential to upgrade the car. And at the same time, a new baby on the way...
Consolidating debt through a secured loan is an attractive alternative to those who are unable to re-mortgage, for any number of reasons. Some people don't want to lose out on a very favourable mortgage rate, or they wish to repay their loan over a shorter period.
Helping the next generation
Parents who have built up large equity in their property can release that value to help their children get on the property ladder.
The major expenses in life are often concentrated at specific times, such as marriage, setting up a home, setting up in business, children going to University. Borrowing during times of high expenditure and clearing the debts at other times is typical.
Secured loans are given to you for any purpose. Whereas, unsecured loans usually have to be explained. A lender will want to know why you want the money and what you will use it for. More questions are asked of the borrower because the lender is taking more of a risk.
One advantage of a secured or homeowner loan is that the monthly repayments are often a lot cheaper than with unsecured loans. Interest rates are high on unsecured loans because it's more risk for the lender.
If you own a UK property that's gained in value then what's the point of paying so much extra for unsecured loans? If the extra you pay erodes your financial position then the unsecured loan route becomes more risky for you. This is why secured loans are becoming a more popular type of loan.