| When
a person requires to borrow money, as almost everyone does from
time to time, there are a number of financial products from
which to choose.
Borrowing
money obviously involves taking out a loan of one kind or
the other, as loan is the name given when a person borrows
from another individual but most commonly from an official
lender such as a bank or a building society.
There
are two main kinds of loans and these are secured and unsecured
ones.
Unsecured
loans are just that unsecured and due to this fact they are
open to homeowners and non homeowners alike.
However
as loan lenders are taking somewhat of a risk in granting
these loans, they are not readily available and particularly
to non homeowners.
To obtain
an unsecured loan an individual would require to be in a steady
long term job, and have a snowy white credit profile. and
even then the interest rate will normally be quite high.
The reason
that a homeowner can obtain an unsecured loan more easily
than a tenant is because of the fact that if the borrower
defaults on repaying his loan, the lender can secure an inhibition
on his property which is like a secured decree which is recorded
at the Land Registry.
This inhibition
means that the lender should receive the loan funds back sooner
or later as the defaulter cannot sell his property without
first paying off the inhibition.
Mortgages
remortgages and homeowner loans all belong to the loan group
of home loans. Homeowner loans have another name and that
is secured loans called such as they are secured products.
Mortgages
, remortgages and homeowner secured loans are all secured
on residential property, making their interest rates favourable.
A homeowner
loan should always be the loan of choice for a person who
owns his property as the interest rate chargesd is normally
lower than the rate for an unsecured loan and homeowner secured
loans are more readily available.
Interest
rates commence currently at about 9% and the homeowner loan
has other added advantages over the unsecured variety.
Homeowner
loans can be taken out from sixty to three hundred months
making them affordable to most people.
Secured
loans are also multi purpose loans meaning that they can be
used to buy or do almost anything from car or caravan purchase,
to funding home improvements. can pay for exotic holidays
to far flung places.
Remortgages
are the replacing of a mortgage from a current mortgage provider
to another, sometimes to simply obtain a better rate of interest
with a new mortgage provider and this is called a like for
like remortgage meaning that no additional funds are taken
out.
However
when the homeowner does in fact want to borrow aditional funds,
a remortgage can be used to do this in the same way as a homeowner
loan.
The interest
rate for a remortgage is lower than that of homeowner loans
starting presently at 1.84%, but there still is an occasion
in which a homeowner loan would be the better way for a homeowner
to borrow.
This is
when he is in a tie in period with his current mortgage and
the tie in period is normally from two years to five years,
and during this time an early repayment penalty would be charged.
The penalty
is from a minimum 2% of the outstanding mortgage balance to
as high as 5%, meaning that a penalty of £2,000 would
be payable on a 100,000 mortgage if the charge was 2% and
£5,000 on a similar mortgage if charged at 5%.
Therefore
during this time homeowner loans would be the ideal solution
for homeowners wanting to borrow, and when the tie in period
is over a total remortgage would be put in place.
Homeowner
loans have normally a one month interest penalty if cleared
early and as such although remortgages and homeowner loans
are ideal loans , the secured loan is the better choice at
such times.
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