| The
majority of individuals know the expressions secured loans,
car loans, mortgages, personal loans, etc. but do not realize
the differences between these loans.
To start
with a short explanation of the meaning of unsecured loans.
The name itself clearly states what these loans are, and that
is that they need no security of any kind.
As such
theoretically everyone and anyone can make an application
for such a loan. This is true in theory, but not in fact in
practice.
Being
unsecured, the lender feels that he is taking somewhat of
a risk, and tenants in particular, will find it difficult
to obtain such a loan these days.
Tenants
and those with a poor credit rating really are mourning the
demise of lenders such as Welcome Finance who advanced these
personal loans to almost anyone Providing that an applicant
was in employment, they could at least obtain a small loan
from Welcome.
Even homeowners
find it difficult in the present economic climate to obtain
an unsecured loan , and there is no point in applying for
such a product unless your credit rating is first class and
you have been working for the same company for a number of
years.
Secured
loans are obviously, as their very name states, the opposite
of the unsecured type, in that they require some form of security,
and usually the security required is property.In the case
of homeowner loans, the property needed is the borrower's
property, or more accurately the equity that is available.
When talking
about business secured loans, the required asset is the commercial
property out of which the company operates.
Secured
loans for homeowners can be used to purchase almost anything,
and they are also commonly used for debt consolidation which
pays off all other credit card debts, etc., and leaves a single,
more manageable repayment in place of all the other debts.
Some people
also confuse mortgages and remortgages, and think that they
are exactly the same form of home loan, when in reality this
is not the case.A mortgage is the loan needed to buy a property
whether to get on the property market for the first time,
or to move from one owned home to another.
Most home
buyers do require a mortgage, as few have sufficient financial
means to pay from their own resources. A remortgage is only
available to homeowners, as remortgages replace an existing
mortgage, very often at the end of the homeowner's current
mortgage deal.When homeowners take out a mortgage, they are
normally tied in to their current deal for a set period of
time, after which many seek a remortgage to obtain a lower
rate of interest, and as such remortgages are not a product
for someone who is not already a homeowner.
Mortgage
rates vary considerably from one provider to another and therefore
it is perfectly feasible to get a better interest rate.
When the
remortgage is for the same value as the previous, it is known
as a like for like, but sometimes remortgages are used to
raise additional money that, like for secured loans, have
a myriad of purposes, including doubling as debt consolidation
loans.
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