Friday, September 24, 2010

Secured Loans - Loans For All Seasons

UK secured loans can cater any possible need - home improvement, debt consolidation, education, wedding, holiday, bad credit, vehicle purchase, etc. These loans are availed by placing an asset as collateral, which serves as a security against the loan amount. In the event of too many delays or repeated default - unintentional, incidental, or deliberate - the lender can seize the pledges collateral to recover his money. Hence, one must pay his EMI’s regularly.

As secured loans are very safe for the lenders, they facilitate loan seeker with quick attention, competitive APR’s and negotiable payback terms and loan conditions. Generally, a secured deal has an amount range of £5,000 to £75,000; an APR range of 7.9% to 19.9 % Variable (typical rate is 13.55 % APR Variable) and a compensation term range of 5 to 25 years. However, a person with a perfect credit history may get a better deal.

But, before approving a secured loan application, the lender calculates the following parameters:

Credit history - which is calculated as good or average or bad

Debt to income ratio (DTI = Debts/Income) - which calculates the persons current monetary position

Depending upon the above-mentioned parameters, the lender categorises the loan seekers as:

Prime customers (safe clientele) are people who have a good credit record

Near prime customers (nearly safe clientele) are people who have an average credit record

Sub-prime customers (risky clientele) are people who have a poor/bad/adverse credit record

The sub-prime customers are further sub-divided to get a better idea of the hazards that these customers may pose:

Light or low adverse credit customers

Medium adverse credit customers

Heavy or high adverse credit customers

Finally, after all these calculations and evaluations the APR and loan terms and conditions are decided. The following example gives a better understanding of how this works:

Prime customer - borrowing £5000 for a period of 36 months would probably pay an APR ranging from 6.5% to 7.9%

Near prime customer - borrowing £5000 for a period of 36 months would probably pay an APR ranging from 8.0% to 11.9%

Sub-prime customer - borrowing £5000 for a period of 36 months would probably pay an APR ranging from 12.0% to 19.9%

A secured loan is the right choice for someone who has a big monetary requirement or a bad credit record [] or is not getting an unsecured loan.
APR’s, payback options and loan clauses can vary greatly. Hence, the loan seeker should gather as much information as possible from as many creditors as are available in the market or over the Internet.


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