Online Secured Personal Loans – Low Cost Aid For You
With online secured personal loans, the borrowers can borrow money by pledging their asset as collateral. The asset is usually your home, however many people will use their car as an asset when they are buying a new car. Basically a loan is provided to the applicant and a lien is placed on the car covering the value of the loan. If the applicant were to try to sell their car, they would first have to discharge or pay off the loan before the car could be transferred to the new owners. Secured loans that use your homes equity work in the same manner with the unused equity in your home provided as a security for the loan. The lender will register the loan against your home and before selling the home, this secured loan would need to be paid off.
A personal loan is obtained at low rates of interest. The borrowers find it easy to repay the loan amount due to the lower interest rates of secured personal loans compared to other types of loans and mortgages. Personal loans can be as short as one month and as long as seven or nine years in some special cases. But most secured personal loans have a maximum term of five years. This longer term will lower the monthly payments making it much easier for clients to be able to balance their monthly budget. A longer loan amortization will have a lower monthly payment, however this also means that the client will pay more interest over the life of the loan than they would for a shorter term loan.
Should Clients Apply for a Short Term Online Secured Personal Loan
Online loans are very easy to apply for since the client can fill in the application online and submit the loan application online to whatever financial institution they wish to deal with. Whether you pick a short term personal loan or a longer term personal loan really does not matter to the bank except that they want to make sure that you can afford the monthly payments.
The monthly payments will be higher for a short term loan compared to a longer term loan. The client reduces the total interest that they will pay with a short term loan since the loan is outstanding for a shorter period and accrues less interest. For most clients it really depends on how much they can afford to repay each month vs. how much interest they want to pay. The faster you repay the loan, the less interest will be charged by the lender.
Lenders will want to know how much other debt you have and what the monthly payments are on these debts. They will compare the total monthly payments to the income you generate as a family and then make a decision. The ratio varies by lender, however typically they are looking for the monthly payments to debt and taxes to be no higher than 35% of your income each month. Some may go as high as 40%, however consumers should really take the time to make sure that they can handle these higher payments and not jeopardize their credit rating.
Why is a Secured Personal Loan Viewed as Low Cost Aid
Secured personal loans typically will have a lower interest rate to reflect that they are secured by equity that you have pledged to the lender in case you do not repay the loan. The lenders view this type of loan as a lower risk of default and they are willing to charge less for these types of loans. Since the cost of the loan is lower, these types of loans are often viewed as low cost aid to borrowers who need a loan for various reasons. The borrower is certainly motivated to repay these loans and to meet their monthly payments to avoid a car being repossessed or a home being foreclosed.
Why Do Clients Need Secured Personal Loans
Personal loans are used for many different purposes and they are not always secured. Some loans are used to complete repairs on homes, others to renovate an older home and still other personal loans will be used to upgrade homes to increase the overall value of the home. Whether a client applies for a secured or unsecured loan really depends on whether the client has equity to pledge towards the loan and whether they are motivated to reduce the overall cost of the loan.
We find that a lot of clients are not aware of the savings that they can obtain by applying for a secured personal loan online. Clients who use a broker are often surprised at how little a loan will cost them when they apply for a secured personal loan. The broker will work to find them the best available rates and will prequalify the borrower to ensure that they will be able obtain these rates. Whether you apply for one of these loans online or through the traditional brick and mortar lenders, secured personal loans will always cost less. Applying online is always more convenient and saves everyone a great deal of time.
While a broker can find you the best rate and terms for a secured personal loan, there may be other costs that consumers should be aware of. For example if you are using your home as security for a loan, your home will need to be appraised to identify the value of the home and ensure that there is sufficient free equity available to cover the loan. Also most lenders will not lend more than 75% to 85% of the value of a person’s home. Each lender will follow different guidelines to always confirm these numbers before agreeing to an appraisal.
Most lenders will want the client to pay for the appraisal costs, however in a competitive market, your broker may be able to arrange for the lender to absorb this cost and save you some money. Note that the brokerage fees are usually paid for by the lender as a finder’s fee and not charged to the customer. Brokers can help you get the best rate and terms without there being any cost. You can still compare what your local bank will provide you in terms of interest rate and other costs, however in most cases a broker can usually find the best rate at no cost to the client.