How to get the Most Competitive Rate on Secured Loans
August 4, 2008
As a homeowner, you will certainly get a better rate on a secured loan with your home as collateral than you would for an unsecured loan with no security. However, not all secured loans are the same and you need to shop around when you want to borrow money in this way.
Even though lenders do advertise certain rates, the one that is advertised may not be the one you get when you apply for a loan. This is because the rate that a lender offers you depends on several factors, which include your credit rating, your earnings and the amount of equity that you have built up in your home. The equity will actually determine how much you are eligible to borrow.
Since the risk to the lender is less when you have property that you put up as collateral, you are likely to get a better rate of interest. The lender sees that you have a stake in making sure the loan is repaid in full because should you default on the loan the lender has the right to foreclose on your property and sell it to redeem the money you borrowed.
This is true even if you have a bad credit rating, even though the rate of interest you pay will be higher than a person with an excellent credit rating.
The best way to get the most competitive rate on a secure loan is to shop around. It is a very time consuming task to visit every lender in person to inquire about the rates and to get an exact rate, you may even have to apply for the loan.
This is not a good thing because if you apply for too many loans within a short period of time it has a negative impact on your credit record.
Fortunately, with the many lenders that have an online presence, you can visit the many websites and compare the rates without applying for a loan until you are ready to do so. You can request free quotes from lenders that have terms that are agreeable to you.
Most of the online lenders also have loan calculators on their sites that are free for you to use. You can enter the amount of money you wish to borrow and the interest rate charged by the lender for its best customers will automatically appear in the appropriate box.
Then you can select the term that you want for repaying the loan and find out what you monthly payments will be. You are able to clear the calculator to enter different amounts of money and different term lengths as well as different payment options, such as monthly or bi-monthly. Once you find a combination that suits what you are financially able to handle, then you can submit your application online and receive an answer back within a very short time.
Some of the competitive secure loans available have flexible options, such as being able to make monthly payments that are higher than the minimum payment you agree to. This will help you to pay off your loan quicker and will save you money because you pay less interest.
You also have protection under the Consumer Credit Act of 1974, which gives you 14 days to pull out of the loan after you do sign the papers.
When you find a secure loan that has the interest rate you are looking for, you also have to make sure you read the fine print to determine if there are any hidden fees associated with the loan that will add to your cost of borrowing.
You should ensure that the loan does not contain a clause so that the lender can charge you a penalty if you pay the loan off before the end of the term. Even if you don’t think that you will pay the loan off early, it never hurts to make sure that you won’t have to pay any penalties.
Payment breaks also add to the cost of your loan. When you obtain a loan, the lender may give you a break by giving you a longer than usual period of time before you have to make your first payment or may allow you to skip a payment once a year. However, interest is still accruing on your loan during these payment free periods and this means it will take you longer to pay it off in full.
It is important to make your monthly payments on time so that you can avoid late fees. Many lenders now prefer to take the funds directly out of your bank account on a specified date, which makes it easier for you and you won’t forget the payment.
You must make sure that you do have the funds available in your bank account so that you won’t have to pay extra fees to the bank.
Written by Peter · Filed Under Loans
A friend of mine aged 36 needs money in order to take legal action against a hospital for doing a botched job on him which has left him unable to work. I am prepared to loan my friend the money to be repaid with interest in one lump in 4 or 5 years but how can i be sure ill get it back eg what steps can i take to secure it on his house??