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may be come as a surprise to many when they realize that interest
rates for unsecured loans are higher than in 2001.
Why this
is surprising news is that in 2001 the Bank of England Base
lending Rate was 6% and now, as everyone knows, it is at an
all time low of 0.05%.
Unsecured
loans therefore should be, if anything, less expensive than
they were nine years ago but this is however not the case.
One of
the main reasons why this is the case is that unsecured loan
are exactly that, that is unsecured. People sometimes fall
into arrears with their unsecured loans choosing when money
is tight to pay secured loans such as their mortgage first,
and lenders can therefore sometimes lose money.
This has
happened a lot over the past three years as many people have
seen their firms close down at the cost of their job.
The underwriting
criteria are strict as regards unsecured loan in addition
to the fact that interest rates are now higher than at the
start of the decade. To have any hope of being granted this
product.
Homeowners
are eligible to apply for a secured homeowner loan which is
obviously secured products for which only homeowners are eligible.
As a secured
loan is naturally secured on a solid asset, the secured loan
lender is more certain that his loan will be paid back, and
as such a secured loan is more readily obtainable than an
unsecured one.
Unsecured
loan lenders need definitive proof as to the purpose of the
loan.
If a an
unsecured loan is to pay for home improvements for example
the lender will require proof that this really is the purpose
of the loan in the form of several estimates.
If a homeowner
applies for a secured loan, it is only a matter of writing
the reason for the loan on the application.
Another
advantage with the secured loan is that repayments can be
spread from five years to twenty five years making the repayments
comfortably affordable to most, compared to unsecured loans
with maximum repayment periods of normally three years and
sometimes five years.
Secured
loans have less strict underwriting than unsecured loans.
Remortgages
have all the same advantages as secured loans making a remortgage
another suitable alternative when a homeowner wants to borrow
a flexible financial product at a good rate of interest.
Remortgages
start with an interest rate of 1.98% and can be repaid up
to twenty five years and with some lenders such as the Halifax
up to forty years.
Therefore
when a homeowner wants to borrow, a remortgage or a secured
loan are often the best choices.
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