There’s been a marked increase in the popularity of debt consolidation loans in the UK over the past decade. This has coincided with the swell in British property prices and is no doubt a response to the additional equity that homeowners have at their disposal. So, using this equity to secure a loan in order to service your other financial responsibilities is a popular solution to the problem of mounting debt. The equity in your home is an asset that can be used as collateral, giving you greater financial leverage when looking for affordable personal finance. Now though, as UK property prices have been falling in recent months, this position is not as strong as it once was. Of course, it is worth remembering that, despite the financial doom and gloom, property prices are still much higher than they were a few years ago. This means that many homeowners still have a substantial amount of equity and can use it to secure a loan on reasonable terms, with a rate of interest that can be significantly lower than an unsecured loan.
With a secured loan, the level of equity that you have in your home will normally determine the amount that you’ll be able to borrow. If you’re interested in working out your level of equity, take the amount you still owe your mortgage away from your home’s current market value. The greater this equity stake, the more you can borrow.
Deciding to secure your loan against your home or other asset can have pros and cons. You should talk to a dedicated, impartial debt advisor who will be able to talk you through the positive and negative implications of your decision. To check up on the health of your finances, visit www.debtsolver.co.uk and take the fast, free debt test. Obviously, everyone’s financial situation is different so no solution will suit everyone. It’s important to seek out professional support that will help you make an informed decision about whether a secured loan is suited for your needs. You need to remember that these loans are secured against your home so failure to meet your repayments could put your home at risk.
The Pros…
There are a lot of pros of associated with taking out a secured loan. Depending on your level of equity, a secured loan can provide you with a great deal of additional borrowing power and basically let you borrow a lot more. Naturally, this is one pro that can quickly turn into a con if you borrow more than you can realistically pay back. The repayment periods on offer are often a lot longer with a secured loan, allowing you to spread the payments out and keep your monthly repayments amounts low. As a secured loan is less risky to lenders, you’re more likely to have your loan application approved; even if you’ve got a bad credit rating.
The Cons…
Of course, if you secure your loan against your home, you run the risk of losing it if you fall behind with your repayments. That’s the major con with any secured loan; no matter how good the offer looks at first, don’t commit to anything you might struggle to keep up with in the long run. You also need to consider the risk of negative equity. As house prices are forecast to fall over the next couple of years, having taken out a secured loan against a substantial portion of your equity you could soon find yourself in negative equity.
For more information, visit www.debtsolver.co.uk
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