Best Types of Loans for a Homeowner
As a homeowner, you are in a very good position to access a number of funding options from a variety of lenders. All lenders will perform a credit check as part of their lending process. It is important to decide upon which type of loan would suit your purposes best. Two options are available:
A secured loan is a loan which is attached to an asset, which could be your property. The lender will usually assess the value of your property, consider any outstanding mortgage on the property and may then be in a position to lend an amount that represents the difference between the two. If there is no equity on the property, the lender will not be able to make an offer of a secured loan.This is a popular method used by homeowners to fund larger purchases or to fund work on their home. It is an attractive option as often the interest rates associated with this type of borrowing are some of the lowest as an asset is attached. The repayment period can be over an extended amount of years which will keep the monthly payment down. As an asset is attached to the loan, lenders tend to afford a bit more flexibility and in some cases will accept those with poorer credit scores.
Remember however, if the borrower defaults on the loan, the asset can be seized and in some cases, this has resulted in people losing their home. You can read more about this type of loan through TrustTwo.
An unsecured loan is a personal loan that is not attached to any asset. A homeowner with a mortgage could be in a good position to access this type of funding provided all mortgage payments have been kept up to date and their credit score is good. Interest rates tend to be higher with this type of borrowing.
Banks, Building Societies, Credit Unions will all be able to offer quotes for secured and unsecured loans. Your banking provider may be able to offer an overdraft facility if a smaller or shorter term loan option is required.
Credit cards are another option open to homeowners and the borrowing offered via the card is useful for shorter term loans. Credit cards can offer 0% APRs for balance transfers and purchases and can offer cash advances.
There are also options available if the loan is for a business purpose and start up business loans can be available. Crowdfunding is an increasingly popular method of obtaining funds for a new or creative venture.
It is important to speak to the loan provider, ask questions and examine the terms and conditions of the loan to make sure that it fits with your purposes. A reputable lender will be able to describe their products in detail so don’t be afraid to ask them to do this. A loan can be a large and long term commitment with heavy default penalties. It is important therefore not to make decisions that you could come to regret or decisions that could have serious consequences down the line. Beware of PayDay lenders and other online lenders that offer loans with extremely high interest rates. They tend to be quite inflexible if payments are late or are missed and can impose some very heavy penalties.