In our day to day lives we are told to forgive and forget, not to be held back by actions in the past. Yet if you have had financial issues which have led to a decline in your credit rating then, even when your situation changes, you will be tainted by your previous history and obtaining a cheap loan will get harder and harder.
But even if you do have a less than glowing credit history it may still be possible to raise the money you need without being crippled by extortionate monthly payments by opting for a secured loan.
The basic premise of the loan is exactly the same as a standard personal agreement, you simply fill in the application form, agree to the terms of repayment and the money is yours.
How Secured Loans Differ
However with a secured loan, not only do you agree to make the monthly repayments to the lender but you also agree to provide them with the security that you will meet the monthly payments by putting up your own personal asset as a guarantee.
Once the loan is complete, the charge against your asset is released. However during the time of the loan, if you default on the payments, the lender is within his rights to reclaim the value owed by selling the asset in question.
This could be your house or your car or anything else that holds sufficient equity to lessen the risk to the lender and provide the incentive for him to agree to the terms.
Though, in principal it does sound a little scary putting up your home as surety against a debt, this is exactly the same process that is used for every mortgage in the country, And if you secure your mortgage loan with a charge over your house there is no reason why you shouldn’t use the same asset to cover further borrowing and make your assets work for you.
This is a great way to obtain a loan if you have had previous problems with repayments which have made obtaining a standard personal loan impossible. Even people with a bad credit history are more likely to be accepted for a secured loan and therefore more likely to obtain the funds they need at the time they need them.
The Advantages of a Secured Loan
In the same way, the security of the loan also enables lenders to offer a higher amount to the customer so that you can borrow more than you would potentially be able to if the security was not available.
And because the risk of default is so much lower, the lender will also happily extend the duration of the loan making monthly repayments even lower and a lot easier to meet.
And as you fulfil your monthly obligations and complete the loan, not only will you have been able to benefit from a cheaper secured loan but you will also be contributing towards improving your credit history so that your chances of obtaining further financial support in the future at an even better rates improve as well.
Written by LoanRater, your number 1 resource for comparing loans online.