It isn’t as easy to get a loan as it once was. When you do find a loan, it is usually at terms that just aren’t affordable. But for those who own their own homes, loans with good repayment terms remain within reach.
Secured home loans are simply loans against the equity in your home. In layman’s terms, secured home loans use the ownership of your home as collateral for the loan.
If you fail to make the payments on the loan, the lender simply becomes the owner of your home. If you make the payments on the loan, you benefit from good credit.
It makes sense that if the lender has consolation in the event you fail to make the payments, that the lender considers the loan to be less risky. As a result, the lender is more willing to provide you with competitive loan terms. Even if you lose your job and can’t make the payments, the lender will still at least be able to get some of the money back by selling your home.
The extra security in a secured loan is why home loans often have APRs that are 1/3 of what you can get for an unsecured personal loan. The bottom line is that you end up paying back a far smaller amount of money.
In addition to lower interest rates, you may also be eligible to receive a much larger secured home loan than a personal unsecured loan. If you’re an average person, the most valuable thing you’ll ever own is your home. Lenders know that the loan is not just secured with equity, but that the home you provide as collateral is worth a lot to you personally.
You will do everything in your power to maintain your ownership of the home. To the lender, this means you will try very hard to make your payments on time.
The amount of money you can borrow is important when you are trying to pay for a college degree or a medical emergency. Many people go the extra step and borrow enough to pay off all other debts. Their debt is then consolidated into a single secured home loan at a very reasonable interest rate and monthly payment.
As long as the payment is made each month, debt collectors disappear and month to month expenses become manageable.
There are a variety of other loan types you can obtain, but few come with repayment terms compared to secured home loans. Most of those are government subsidized or government guaranteed loans, for which you qualify only in specific circumstances. So if you need to get an affordable loan to get your finances in order, you’ll want to consider a secured home loan.