The Good, the Bad and the Ugly Facts of Equity Home Loans!

Michelle Tuvey Michelle Tuvey | Loan Underwriter

There is no such thing as the perfect consumer-financing tool. If there were, everybody would be borrowing money to his or her heart's content. Yet there are some forms of consumer financing that are better than others are. Equity home loans are a good example. These loans allow homeowners to leverage their equity as security for substantial borrowing. It allows homeowners to borrow tens of thousands of pounds over long periods.

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As with any form of consumer financing, the home equity loan has its strong and its weak points. We prefer to describe this as the good, the bad, and the ugly of secured loan financing. Here are the details:

The Good

The good aspects of secured home loans far outweigh the bad and the ugly. That is why Secured Loan Expert recommends these as long-term financing tools. What are those good aspects? First of all, loans are easier to come by because you are using your home as collateral. With real, tangible property acting as security against default, lenders are more willing to offer loans even with bad credit.

Second, secured loans tend to have lower interest rates and better repayment terms as compared to unsecured loans and credit cards. In conjunction with that is the potential to borrow tens of thousands of pounds up to the limits of your equity. Lastly, secured loans are flexible inasmuch as you can use the money for just about anything.

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The Bad

The bad aspects of secured loans are two-fold. First, not every lender delivers as promised. When lenders advertise loan products they tend to give as few details as possible while also making their loan products sound as attractive as they can. Yet you may discover that a lender does not offer what you expected when you initially applied. This is why it is so important to compare lenders as best you can.

Second, secured financing comes with all sorts of fees and charges attached. For example, your lender might assess a fee to cover the cost of placing a second charge on your property. Most of the time there will be administrative fees, filing fees, and charges associated with establishing a loan. All of these things add up to increase the total cost of borrowing. Make sure you ask for all the details regarding the charges and fees before you apply.

The Ugly

Despite the flexibility and financial power of equity home loans, there is one ugly aspect you really need to understand. What is it? It is the fact that you risk losing your home if you fail to pay your loan as promised. This is the whole point of using the equity in your property as collateral.

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If you are approved for a secured loan against your home, the bank places a second charge on your property. Defaulting on your loan could result in your home being repossessed and sold by the lender. Any money left over after your mortgage is satisfied will go toward paying your debt to the bank that provided the secured loan. If there is not enough to cover all of it, you will have to pay the rest out of pocket.

Also keep in mind that a default and repossession would go on your record for a minimum of six years. This could hinder your future ability to obtain credit of all sorts. It could also make it more difficult for you to rent a home or get a new job. So think long and hard before you apply for a secured loan against your property. Make sure you have enough room in your monthly budget to comfortably make payments.

Equity home loans are a great tool for covering long-term financing needs without breaking your budget. However, as with any form of consumer financing, these need to be used with care. At Secured Loan Experts, we believe the best advice we can give you is to compare loan products side-by-side and ask many questions. The better informed you are, the more likely you will be able to make a wise decision.

If you would like some FREE professional advice on any aspect of Equity Home Loans please don’t hesitate to contact our friendly team of experts.

Our team can source the best deals available from our whole of market panel of top high street and specialist lenders, help you compare the offers side by side and when you have found the most suitable deal for your needs create and submit an optimised application on your behalf ensuring that the lender reviews your case in the best possible light.

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