Secured loans are commonly used although many will regard them as a property owner’s last resort. They work because a secured loan will provide the lender with the security of a property in exchange for the loan.
There are pros cons of course with a secured loan. The benefits to a lender are that a loan may be available to a borrower who is unable to qualify for a loan via other methods due to a poor credit rating or CCJ’s. Secured loans may also be available for large amounts for example 75k compared with a smaller unsecured loan.
Disadvantages are that a secured loan can be expensive as often the loan period is longer than an unsecured loan sometimes up to 20 yrs. There is a cautionary note here, borrowing for a longer period may reduce monthly payments however the total amount of interest paid may be greater.
Example of loans of 10k @10% interest for a period of 5/10/15 years**:
5 years 212 pm Total paid 12,270 Total interest paid 2,720
10 years 132 pm Total paid 15,840 Total interest paid 5,840
15 years 96 pm Total paid 23,040 Total interest paid 13,040
** Source BBC finance page–May 2011
A golden rule of borrowing is that you should not borrow money if you do not need to. Whilst this may seem common sense there are borrowers who take a loan for the wrong reason, for example to consolidate various loans or debts. This may end up with the total amount being greater than the total of the separate loans. If you have a good credit rating then a secured loan may not be the best option for you. Another golden rule is do not borrow more than you need, do not be tempted to increase a loan for spending you had not considered. Examples here include holidays, new cars or other luxuries. It should be stated that there are alternatives to secured loan. These include using savings, credit card balance transfers or even a topical idea these days – just reduce other spending instead!
Other points to consider before borrowing are knowing your debts in total. Do you know how much your individual debts are? If you are considering a secured loan the secret is to Plan Plan Plan!
Plan the amount you need to borrow & stick to it. Compare prices to get the best deal, there are a variety of Internet sites that provide this service. Check if there is an option to borrow your required amount from your existing bank or building society instead of taking a secured loan.
You will find that interest on a SL depends on the size & length of the loan, on your credit score & the equity in your property. Lenders assess those in different ways, for example one lender may be cheaper for good credit scores & limited equity but not for poor credit scores & good equity. You should also check if there are any early redemption penalties on any loan. A note on home improvements here
Home improvements can turn your home into the place you want to live in or simply make life easier & more comfortable for you in your home. Home improvements are various & include extensions, conversions, ‘green’ measures or just plain redecoration.
Home improvements fall into the following general categories with example:
Comfort – landscaping, air conditioning & wood flooring
Maintenance & repairs – redecoration & subsidence,
Space – extension & loft conversions
Energy – solar panels & water conservation
Safety & security – alarms, security lighting & sprinklers.
These may all suit your needs & increase the enjoyment & comfort of your home. They may even increase the value of the property, however, this is not always the case & is not guaranteed. I know of one family who built a swimming pool in the back garden of their semi to suit their needs. Whether this helped or hindered the eventual house sale I do not know but this should be a consideration. Ideally your home improvements should add value to the property & research is sensible. Of course some will want to improve their property for their own needs/requirements regardless of the effect on property valuation. I did know a couple in Wales who replaced the back wall with a whole glass structure. Did this add value? I don’t know but I doubt it somehow. Of course an Englishman’s home is his castle & it is your money but especially these days when money is tight every penny counts.
The work done professionally or have it done by DIY. Having the work done by professionals could involve hiring specialist contractor’s electricians, plumbers etc or hiring a general contractor to manage the whole project. Such issues may depend on how big the overall project is & what skills you possess to undertake some or all of the work.
Whatever you wish to do in this area be sure to plan your work, manage you