Secured Loans Questions
There are a number of terms which you come across when taking a secured loan. You may not understand theses terms very well. So, you may end up making a decision regarding an asset without the proper knowledge.
This can lead to a precarious situation. In the following paragraphs, we have tried to explain a few terms and terminologies.
- Secured loans - These loans require collateral to be sanctioned. The collateral is returned to the borrower after the secured loan has been repaid in full.
- Secured loan repayment - The secured loan can be repaid in two ways. It can be paid in small monthly instalments comprising of the principal and the interest amount. This is called the repayment method. The other method is when only the interest is paid, and the balance on the secured loan is paid through a single balloon payment. This is called the interest-only method.
- Rate of interest - The lending company offers cash to the borrower for a certain time period. Had the amount been invested in a bank, then it would have accumulated interest. Therefore, the lender expects the principal amount of the secured loan along with interest. This interest is calculated according to a predetermined rate of interest. This keeps on changing as the base rate changes in the market.
- Bad credit history - A person who has or had the following is said to have a bad credit history:
County Court Judgements
Individual Voluntary Arrangements
Self-employment
Bankruptcy
Mortgage arrears
- Homeowner loans - These are secured loans which are taken by homeowners to fulfil their financial requirements.
- Home equity loans - Home equity is the value of a house. A lender offers secured loans to the borrower against the equity in the home.
