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Also called a homeowner loan, a secured loan is a type of personal loan that lets you use the equity you have in your home as collateral against it. By using your home equity as collateral, you reduce the risk for the lender, meaning it will be more likely to approve you for a loan, and will also generally offer you better rates and terms than a regular personal loan.
If you fail to repay your loan, the lender can then seize the equity you have in your house. In certain situations, the lender may also take out a court order forcing you to sell your home so that it can recoup the cost of the loan.
To be eligible for a secured loan, you’ll need to own enough equity in your house to cover the cost of the loan. For example, if you wish to borrow £10,000, you’ll need to have at least £10,000 of equity in your house to use as security against the loan amount.
As with any other loan product in the UK, you’ll also need to meet the following criteria to be eligible for a secured loan:
If you’re looking to get a secured loan, you’ll first need to ensure you have enough equity in your home to cover the amount of money you want to borrow. Once you’ve confirmed that this is the case, you can apply for a secured loan by following these steps:
When considering your secured loan application, the lender will want to confirm that you do in fact own the right amount of equity in your house, as well as the overall ownership situation. Just as importantly, the lender will want to make sure that the equity you’ve listed on your application has the correct market value.
To do this, the lender will often appoint a surveyor to inspect the property and determine its value based on factors like its location, condition and quality, as well as current market conditions. This valuation may not match up with your own valuation of the property, or indeed the amount you paid to purchase the house.
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