Homeowner loans, simply, are secured loans that allow you to borrow high amount of money from the banks. They are called “secured” because you offer the lender collateral, i.e. your house (or similar property) in case you’re unable to pay off your debt. This is their motive and security to offer you a loan in the first place.
The amount of loan can start from £5,000 and go up to £250,000.
Such type of loans can be extremely helpful in financial situations requiring large revenue such as setting up a new business. Most homeowner loans offer customizable repayment durations.
Types of Homeowner Loans
There are two main types of homeowner loans: fixed rate and adjustable rate.
Fixed rate loans, as the name suggests, are credits with a fixed interest rate that continues till the duration of the loan. The main advantage for fixed rate loans is that they charge you a consistent amount per month, without any variations; however, they can be extremely costly in the long run. Although you can choose to pay off your debt earlier than your plan is for, this may have early repayment fees attached.
Adjustable rate loans have interest rates that depend on stock and market shares of the lending bank. It means you might end up paying less or more than you have planned for. It is only advisable to get variable rate loans in an economically stable market; fluctuations could be extremely disadvantageous.
Using the services of a professional to apply a homeowner loan for you is the best idea. You need to choose the right type of loan, so that you can pay the debt easily. Hiring consultants may seem you expensive initially, but will prove to be cost-saving in the long run.
Do you Qualify for a Homeowner Loan?
Before you apply for a homeowner loan, you need to assess whether you’re eligible for one or not.
As homeowner loans are secured, with your property given as security to the creditor, they are much easier to get than unsecured loans ― probably the biggest reason for their popularity. Unsecured loans, not only demand highly maintained credit score, but also offer lower interest rates. However, this is not the case in homeowner loans. Banks have a lot less to risk in these homeowner loans, and don’t hesitate much before approving one.
Having a few dents in your credit history won’t hurt, but too many might make the bank rethink on your application. The bank needs to be sure that you would make your monthly payments, so it’s always better to have a reasonable credit history.
Besides the formalities, you need to personally gauge will you be able to make the monthly payments on the loan you are demanding. Taking a loan and burying yourself under debt, without having enough resources to repay it is inviting trouble. Hence, it is always wise to make an informed decision for your own betterment.