Repaying your secured loan

A secured loan is a popular type of loan, and is taken out by many homeowners all over the UK for a variety of reasons. These loans are only available to homeowners, as they are secured against he equity in the home, and therefore provide lenders with increased security and peace of mind. Because of the secured nature of these loans and the increased security to lenders consumers can enjoy some very competitive interest rates, as well as enjoying a number of other benefits available with secured loans over unsecured loans, such as longer repayment periods and lower monthly repayments.

When you have a secured loan part of the equity in your home is used as collateral for the loan. Secured loans are available to many homeowners including those with bad credit in many circumstances, but the amount that can be borrowed is partly dependant upon the level of equity in the home. Some lenders will allow you to borrow up the amount of equity in your home, some will allow you to borrow only a percentage of the level of equity in your home, and some will allow you to borrow over and above the level of equity in your home.

People take out a secured loan for all sorts of reasons, and this includes the consolidation of debts, carrying out home improvements, funding special events such as a wedding, paying for a dream holiday, buying a new car, and more. Of course, when you take out a secured loan you also have to pay the money back and it is important that you do not default on repayments, as these loans are secured against your home and therefore you could risk losing your home if you default on repayments.

When you take out a secured loan you will have to make set monthly repayments for a specified period of time, which will be arranged when you take out the loan. However, if you decide to sell up there are a number of options open to you depending on the circumstances. The loan does, of course, have to be repaid but there are a number of options with regards to how and when you repay it depending on your circumstances and the lender through which you have the loan.

Repay from your equity

One of the most common ways of paying off a secured loan in full when you sell your home is by using the equity in your home to pay off the loan. The equity in your home is the amount that you receive from the sale of your home after the main mortgage has been paid off. Your solicitor will normally pay off your secured loan from your equity when the sale of your home goes through, along with arranging the repayment of your main mortgage. Once this has been done your secured loan will be repaid in full.

Transfer your loan

Some lenders will enable you to transfer you secured loan to your new property, which is useful if you do not have the equity in your existing property to repay the secured loan following the sale of your home. However, not all secured lenders will enable you to transfer your debt, and this is something that you need to check with your lender.

Take out a larger mortgage

Another option is to take out a larger mortgage for your new property, which will enable you to repay your secured loan and then effectively transfer that amount on to your new mortgage. This is a useful solution for those with insufficient equity in their existing property to pay off the loan.

In order to determine which method of repayment is right for you in the event that you sell the home it is important to conduct some research. Firstly you should find out what the equity levels are in your home, as this will enable you to determine whether you have sufficient equity in your home to repay your mortgage balance and the balance of your secured loan. To work out the equity simply get a valuation on your home by a professional and then get an outstanding mortgage balance from your mortgage lender. You can then deduct the amount that you owe on your mortgage from the market value of your property and this will leave you with your equity. You should also ensure that you contact your secured lender for a firm idea of how much you will have to repay on your secured loan so that you know just how much you need to repay the loan in full from your equity.

Another important move is to contact your lender to find out the options available to you. For example, some lenders may not allow you to transfer your loan and this means that you will have to look at other options.