If you are one of those who doesn’t quite understand what a secured loan is, you are probably not alone.
Some think a secured loan is the same as a car loan which is secured by the car. This is not true, what a secured loan really means is that the loan is secured by the borrower’s property of the equity in their property.
And this means that if the specified monthly payments are not made, the property with which you secured the loan can be repossessed and sold so that the lender can recover the debt.
In the case of a mortgage loan, the mortgage company always has first chance to claim the property in order to receive their unpaid debt. The mortgage company has the first dibs on the property; the secured loan company has the second charge, registered in the county’s land book.
The secured loan company is the one that works to calculate and underwrite the basis for the loan so that it is affordable for the buyer. Additionally, they set up a plan to provide payment protection to assure that repayments are made in the event of some emergency situation, illness or even death.
There is always the risk that if you are unable to pay the loan payments, you may lose the property used to secure the loan. This can be devastating, but if you are a responsible borrower and place the repayment of the loan at the top of your priorities, you should be relatively safe from this kind of catastrophe.
The main objective here is to understand both the risk and perks of a secured loan and in addition to being certain that the payments you will need to make are affordable for you.
Often, in the event of a secured loan, the secured loan lenders will tend to offer an even better overall deal, since they feel safer in getting back their money. Secured loans may be offered for a long term with even smaller repayments and ultimately be more affordable for you.
Another plus is that usually with secured loan lenders are willing to loan larger amounts. Homes such as summer or winter homes, home extensions, home improvements and even consolidation loans where the person’s total existing debt is combined into one, more affordable payment. This type of loan could give you the fresh start that you need to improve your financial future.