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Secured Loan Rate Affects Loan Value

Apr 21, 2008
With the popularity of secured loans peaking in the UK, it is becoming more important than ever for Brits to try to obtain the best secured loan rate. The loan rate is the interest rate, or annual percentage rate (APR) a lender charges to a borrower to provide them with loan funds. Even a fraction of a percentage point difference in the interest rate can have a big impact on the cost to repay debt.

Secured loans come in various shapes in sizes. Unlike credit cards, and other types of unsecured loans, secured covers require the borrower to provide the lender with security against an asset. Homeowner loans are a common example of a secured cover. Some other loan types may be secured by cars, or other specific asset types. The main difference between a secured loan and one that is not secured is that the borrower is placing more than just his credit reputation at risk with the security. If borrower fails to meet his debt obligations, under a secured loan, he could risk losing his property to foreclosure or lender repossession.

There are many benefits to both the lender and the borrower when collateral is used to obtain a loan. For the lender, it means a reduced risk of non-payment or financial loss. The borrower either repays their loan, which is ideal, or he does not, and the bank or lender gets the collateral in exchange. Most lenders offer a better secured loan rate than unsecured as there is less risk. The lower the lender's risk, the more flexible they are with loan amounts, and the more willing they are to reduce loan costs (interest payments) to the borrower.

Borrowers look for a secured loan rate for many reasons. Some simply want the best APR possible and know that providing security to the lender gives them that. Some bad credit borrowers have little or no choice but to secure their loan. Lenders require security for some debtors, but often the rate differential forces the borrower to opt for the secured option. Securing a loan gives bad or fair credit borrowers a chance to get loans that might not otherwise, and to rebuild their damaged credit. Of course, their property is at risk in the event of non-repayment.

One of the best advantages borrowers have in today's loan environment can be credited to the independent or stand alone loan broker industry. Loan brokers specialize in helping consumers get matched to the best available loan products and rates given their specific situations and credit. Many brokers can help bad debt qualifiers find a secured loan rate by carefully examining all opportunities and maintaining good relationships with a collection of lenders. Current loan rates for secured products are as low as ever, based on interest rate cuts over the last year. The average APR for a secured loan is about 11 to 12 per cent, with some good credit borrowers finding interest rates as low as 5 per cent.
About the Author
Louis Rix is Director of Netloans Ltd, a leading Secured Loan Broker for UK Homeowners offering a secured loan service and homeowner loans for any purpose, ensuring that their customers get the best loan deal.
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