BENEFITS OF HOMEOWNER LOANS: WHAT’S IN IT FOR ME?

If you are currently researching the best way to raise finance for a new project, home improvement, holiday or maybe your children’s education, you are very likely to be among the many, who feel let down by high street banks, who advertise a low rate APR which just isn’t available to the majority of people. What makes matters worse, is that each credit check performed has a negative effect on your credit rating, so chasing that headline rate can be really frustrating and troublesome in the long run.

Don’t worry, you are not alone. This issue affects many people who are searching for the most cost effective way of borrowing. The advertised rate is only offered to those with a specific financial standing, that quite often doesn’t apply to the majority of those who apply. Make sure you read the small print and check the rate you are offered as many accepted applications, have a much higher rate than associated with them, which you might not notice when the loan agreement is returned for you to sign!

In most cases, high street lenders are offering what is known as an ‘unsecured loan’ – simply meaning it is offered to you without any need for security. Each applicant is risk assessed for the loan amount and the APR offered is dependent on your credit rating and history. This is fine, but often the high street lender will limit how much you can borrow and dictate a maximum period you can repay it in. Alternatively, a ‘secured loan’ may offer you more flexibility to repay over a period which suits you better and allow you to borrow more than is possible with an unsecured loan. If you are a UK Homeowner in England or Wales with equity in your home, it may be a good time to consider a secured homeowner loan.

The more equity you have, the more you can borrow

A secured homeowner loan (much like an unsecured one), requires a credit check and certain financial criteria to be met, but the lender may be more flexible in it’s decision, based on the amount of equity you hold in your current property and it’s market value. In effect, the available equity you hold allows your loan provider to make an easier lending decision as it offers them security in the event of you defaulting on the loan. Obviously, you don’t plan to default on your loan and you simply wish to borrow money at the best rate and over a period which suits you, but from a risk assessment point of view, that equity in your home is what a lender looks at when making a decision on whether or not to lend you money. The more equity you have, the larger the loan you may be able to take.

Using your home as security

Using your home as collateral is much like providing a financial deposit to secure a car or tickets for a popular event – however, as you are effectively using your home as an insurance policy, it is important that you discuss the most viable repayment options for you and your income. Arrow Loans as a responsible and direct lender, will be happy to take you through this scenario each step of the way. Secured homeowner loans provide both parties with peace of mind, and as such are seen to provide an easier transaction for all involved.

What can I use my loan for?

While a secured homeowner loan with Arrow Loans can be used for any purpose (within reason and subject to agreement), using the available equity to apply for extra money to upgrade or repair your home, offers many advantages in the long run. Replacing a kitchen, adding an en-suite bathroom or embarking upon a major extension can add value to your property, which makes sense in the long run. Just remember, borrowing for these purposes can be a wise investment as often the property price increases in line with the work you carry out. This isn’t the case with a vehicle which will decrease over time, so factor this in when deciding how much to borrow and what to use your funds for!

Most of us are unable to pay for home extensions and upgrades using available savings, so a secured homeowner loan might be the answer for you, if you plan to invest it wisely and borrow within your capability. Remember, even though a homeowner loan uses the available equity in your home as security, the fact is, you must still be able to afford the payments on your mortgage + the cost to repay the loan.

The basics of how it works

Let’s assume you have a home worth £200,000 and your mortgage is £100,000. This means, you have £100,000 worth of equity in your home. In the simplest of terms, any lender who offers you a secured homeowner loan, knows that in the event of you NOT paying your loan and defaulting, they can get their money back from this available equity. This is the ‘secured’ element of the secured homeowner loan e.g their rights to it, should you fail to pay!

In addition, if you are currently paying £500 per month for your £100,000 mortgage and you take a loan for £10,000 for example, your monthly payment will increase to cover the cost of the additional borrowing. If this is done through the mortgage provider, your monthly payment will be adjusted accordingly, otherwise a separate monthly loan amount will run alongside it based on the amount you borrowed and the APR rate you agreed.

Obviously, you should NEVER enter any loan agreement if you feel you are not going to be able to pay for it. You could lose your home, so only borrow funds when you are sure you can repay it comfortably.

Flexible and Far-Reaching

A direct lender like Arrow Loans is able to take a much more flexible and relaxed view of the risk associated with your loan application. This means that, on the whole, you are far more likely to have a loan application accepted, as the lender has visible security in the deal. Secured loans are a fantastic idea for those who know their financial situation well and are confident in their ability to pay the additional monthly costs.

With Arrow Loans, you can secure yourself up to £25,000 over a maximum of 15 years (equivalent to 180 months) – and while we cannot guarantee a deal which will be accepted before application due to each case having its own merits and equity value – we can guarantee that our secure homeowner loans portfolio allows our clients to feel free to request and receive fantastic loan rates that you simply will not be able to find without security elsewhere.

Where Do I Start?

Getting started and signed up for a secure homeowner loan is quick, simple and painless – providing that you are between the ages of 21 and 68, are a homeowner occupier within England and Wales and are able to make repayments from your income without threat of default, all you need do is contact us – simply fill out our application form and we’ll do the rest.

We are a regulated direct lender with over 55 years in the loans trade, offering simple, easy-to-understand and comfortable to repayment schemes to thousands of homeowners looking to borrow a little money to help fund their home and/or leisure. If you’re considering the merits of a secured homeowner loan, why not contact us at Arrow Loans today on 0845 066 8880, or apply online via application form?