If you’re looking for the cheapest secured loan read on and find out all you need to know about the secured loans market in the UK.
Before searching for the best secured loans in the UK, it might be useful to brush up on the facts and get to know the market a bit better.
What is a secured loan?
By taking out a secured loan, you are borrowing money that is secured against your assets, usually your property.
It’s wise to consider very carefully before going down this route, as you could lose your home if you cannot keep up the repayments.
Always make sure that the cheapest secured loan you find in the UK does not become a very expensive one.
|Best Home Equity Loan Fixed Rates: Cheapest Home Owner Loans 2018|
Why choose a secured loan?
Secured loans are a tricky market, where many lenders are only willing to work through brokers.
To ensure you have a good chance of finding the best secured loan rates available to you in the UK we work with a loan broker to widen the secured loan possibilities available to you.
This loan broker has been carefully selected to ensure you receive the highest level of service.
Secured loans comparison – how to find the best secured loans (fixed home equity loan rates)
The UK secured loans market is full of pitfalls for the novice or the unwary, as it’s full of lenders who run the whole gamut from highly reputable merchant banks to those who are little more than loan sharks.
Once you’ve identified a cheap secured loan by using our secured loans calculator we will then refer you to a loan broker that we have vetted.
Is the cheapest secured loan always the best secured loan (cheapest homeowner loans)?
Before searching for the cheap secured loans, you need to be honest about your loan requirements. For instance:
Will you take a secured loan from a lender you have not heard of (fixes rate secured Loans)?
- How much can you afford to borrow and pay back?
- What happens if you want to pay back your loan early?
- Once you’ve understood and assessed your circumstances against these pointers and you are prepared for some questions about your assets, you’re ready to go on to next stage.
3 Reasons the Cheapest Homeowner Loans May Not Be the Best (10 year fixed home equity loan rates)
We constantly hear of the necessity to shop around for the cheapest homeowner loans before signing on the dotted line. That’s good advice. There is no way to know what kind of deal you might be getting if you don’t compare it with other offers. Still, there’s more to a homeowner loan than bottom-line price. At the end of the day, the cheapest loans are not always the best loans.
If you are thinking about a loan, also consider that banks and building societies are businesses. They have to make money off the money they loan to stay in business. As a customer, you will be charged interest and a variety of fees and charges that go toward paying the lender’s expenses and making a profit. As with any other product you might buy, homeowner loans can only get so cheap before banks and building societies start losing money.
Here are three reasons the cheapest loans might not be the best:
1. Time Can Be Your Enemy
One of the ways lenders might make a loan ‘cheap’ is to advertise extremely low monthly payments. This sounds good to the inexperienced borrower who looks only at monthly outlay. What unsuspecting borrowers may not realise is that lenders can make monthly payments cheaper by extending loans for longer amounts of time.
Before you assume this is a good idea, take some time to do the maths. A £10,000 loan at 5% with a repayment term of five years will be cheaper in terms of monthly outlay than the same loan paid over three years. But when you add in the total interest, you will actually spend more by servicing the loan for an extra two years. Cheap only gets you so far when you realise that lower monthly payments usually come at a price. Simply put, time can be your enemy when comparing homeowner loans.
2. Service Fees and Charges
Another method for marketing cheap loans is to offer a very attractive introductory rate to which the lender adds additional service fees and charges. The law requires lenders to be completely transparent with these additional fees, but how many borrowers actually take the time to understand the details? It could be that the cheapest loan on the market does not end up being so cheap with all the extra service charges and fees.
It is wise to compare loans for things such as origination fees, late fees, missed payment fees, insufficient funds fees, and the like. Do not pay more than you have to for the service and maintenance of your loan.
3. Problems with Early Repayment
Lastly, the cheapest homeowner loans may not necessarily be favourable to borrowers looking for early repayment. Remember that banks and building societies make their money primarily on interest. If you repay your loan early, they earn less. Banks get around this by attaching early repayment fees.
It is one thing to accept a loan with an early repayment charge if you are positive there is no way you will be able to offer repayment early. But if there is any chance you might want to speed up your loan payments to save on interest, look for a loan that does not have an early repayment fee attached.
It’s always a good idea to shop around for homeowner loans in order to get the best deal. But remember, the cheapest loan is not always the best loan. You need to look for the loan that costs you the least amount of money in the long run.
Homeowner loans are debts that are secured against your property and, as such, they are only available to homeowners with equity.
These products could also be called secured loans, although technically the latter could be secured against another asset, such as a car.
You’re likely to need a decent credit history to qualify for a homeowner loan, although lenders may be less fussy than with an unsecured loan.
It’s typical for homeowner loans to be considered by people looking to borrow larger sums – perhaps between £15,000 and £100,000 – and for the loan term to be over a considerable period – perhaps between five and 25 years.
None of these figures are set in stone, though – the loan amount and/or term could be higher or lower, depending on circumstances.
The amount of equity you have in a property, your personal circumstances and your credit history will all play a part in determining the deals you’ll be offered.
Homeowner loans v unsecured loans (lowest fixed home equity loan rates)
The reason that lenders are less fussy about your credit history when taking out homeowner loans as opposed to unsecured ones is because they have some certainty that the debt will be repaid as the borrowing is tied to your home.
Gocompare.com’s smart search tool allows you to conduct a soft search for loans, meaning that you’ll only see the products you’re likely to qualify for and helping you avoid failed applications that can damage credit scores.
The best-buy table also lets you see homeowner loans against unsecured borrowing options, helping you find the right deal for your particular situation.
Types of homeowner loans (current home equity loan fixed rates)
Broadly speaking, there are three types of homeowner loans to choose from: Cutting the cost of loans
Short-term fixed rate homeowner loans (best home equity loan fixed rates)
With this sort of product you pay a fixed amount every month throughout the short term of the fixed rate (usually between one and five years).
Your repayments will then revert to the lender’s standard variable rate, meaning that your payments could go up or down.
Fixed for term homeowner loans
With fixed-for-term deals you pay a fixed amount every month throughout the term of the deal, giving you peace of mind that your repayments will not fluctuate and the ability to budget your outgoings.
Variable rate homeowner loans
With variable rate deals the interest rate you pay may fluctuate depending on the Bank of England base rate or market forces. This means that your monthly repayments and the total amount you repay over the term could increase or decrease.
If interest rates go up, you could repay a lot more than you originally budgeted for or, in the worst-case scenario, be unable to meet your repayments.
A lender is likely to want to know what you plan to do with the cash
Some lenders may charge a penalty if you repay the debt early (because they will not be earning the interest they expected). The fee will vary between lenders and products.
Availability of funds
Lenders may charge a fee for same-day transfers. With normal transfers (usually two-to-three working days) you can usually avoid this fee.
Check the terms and conditions thoroughly for other fees, such as arrangement fees.
Payment breaks/deferment periods
Some lenders may offer ‘payment holidays’. While these can be beneficial if finances are tight, you should bear in mind that interest will continue to be charged, meaning that the total amount you have to repay will increase. How to improve a credit score
Many products have strict eligibility terms such as age (usually you must be 21-65) and residency.
In most cases you must have been a UK resident for at least three years, have a current account and have a regular income.
Low advertised rates
Beware of headline rates – by law these rates only need to be given to 51% of successful applicants.
So, 49% of successful applicants are likely to pay a different, more expensive rate, and others are likely to be turned down with a mark placed on their credit files.
What are homeowner loans used for?
There could be a number of reasons why you need to borrow a large amount, and you should realise that your lender is likely to want to know what you plan to do with the cash.
If you’re considering a large homeowner loan, look into whether remortgaging is more appropriate
Perhaps the most common reason people take out homeowner loans is to fund property improvements or to consolidate existing debt.
You might decide it makes sense to pay for home improvements using such a deal because it could add value to your property – for example, if you build an extension or conservatory. Personal loans
Borrowers wishing to consolidate their debts could cut the interest they pay quite dramatically – for example, you may be paying a high rate of interest on credit card debt or for other smaller, unsecured debts.
A homeowner loan could have a much lower rate of interest, allowing you to save money and simplify your finances, but you must always remember the risk you’re placing your home under.
Alternatives to homeowner loans
If you want to borrow a smaller amount, or you’re unsure about securing a debt against your home, then you might want to consider an unsecured, personal loan, or some of the peer-to-peer lending options that are available.
If you’re looking for a small amount, consider an authorised overdraft and think about the pros and cons of using a low APR or even a 0% credit card.
Another option – likely to be more appropriate for larger debts – is to remortgage, freeing up a chunk of your home’s equity to fund your project.
Of course, that will mean you spend longer repaying your mortgage and you should look out for high arrangement fees, but it could work out to be the cheapest way to borrow the cash.
Protecting a homeowner loan
Although it may be cheaper than an unsecured deal, taking on a homeowner loan is a serious financial decision. If you can’t keep up repayments then you risk repossession. Income protection
This means that you should only consider such an option if you’re really confident that you can meet the monthly repayments.
If you know you can afford it but want to protect your repayments in case you became ill or were made redundant, it’s worth considering an insurance policy to protect your homeowner loan.
The entire income protection industry has tended to be unfairly tainted by the payment protection insurance (PPI) scandals, but the right policy can help provide genuine peace of mind.