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  • Secured Loans - Filling the Void Created by the Deficiency of Resources

     

    "Money is like a sixth sense without which you cannot make a complete use of the other five."

    W. Somerset Maugham aptly describes the role of money in the present day world. The presence of money divides the people in two classes - one who have money and others who do not. It is the latter group of people who can best describe the importance of money.

    Had it not been for secured loans these people would have been starved of the luxuries of life. Secured loans are loans or borrowings by people to pay for goods or services usually taken with collateral to back the loan. Generally a collateral is advanced which values more than the secured loan offered. This will be helpful in case the borrower fails to repay the secured loan in full.

    This does away with the misconception that the lenders are bent upon repossessing the home. The lenders have little interest in the home or the asset offered as collateral. They take the step only as a last resort. The borrower is principally responsible for the state he is in. Lenders vie for the business of secured loans. The borrowers can exercise maximum bargaining power in the decision regarding the interest rate and the terms of repayment. The borrower makes the final decision on the fate of the secured loan. Thus the borrowers must accept the responsibility of the decisions.

    So, instead of escaping secured loans the borrowers can use the secured loans to their advantage. As compared to the other finance options, secured loans score the highest in terms of customer preference. It is the presence of collateral which make it less precarious for the lender. The low interest rates are a result of the low degree of risk involved in the secured loans.

    The borrowers can heavily minimize the undesirable effects of secured loans by following the maxim "think twice before you leap". People can get matter related to the pros and cons of secured loans on the internet, through books, magazines, etc. They can also approach independent financial advisors for a more personalized advice. Taking an informed decision is always important because certain assets are on stake.

    Secured loans are taken for a number of purposes. The most common uses of secured loans are making home improvements, buying car or any other vehicle, consolidating debts, and repaying holiday bills. While other options can be used for the payment to these purposes, secured loans are unrivaled. Along with the low rate of interest, there are many more features which make secured loans the best finance option.

    Secured loans may be molded according to ones requirements. Interest may be charged in the manner that suits the borrower. There are chiefly four ways of charging interest - fixed rate, variable rate, capped rate, and discount rate. The borrowers, after learning about the methods in detail make the decision.

    Similarly, secured loans may be repaid in the manner which the borrowers desire. Repaying part of the principal and interest in small monthly installments continues to be the most widely used method. Other methods which have gained importance are interest only method and single payment method.

    There is no restriction on the use of secured loans for purposes other than the one specified. The lenders approached may not offer the features desired. This does not necessitate the borrowers to accept anything and everything. There are a multitude of lenders in the UK and the requirements of the borrowers are bound to match offers by some lenders.

    But once the crucial decisions on secured loan are made, they must be committed to them. Otherwise, the ill effects that one most feared will come for real.

    Andrew baker has done his masters in finance from CPIT. He is engaged in providing free, professional, and independent advice

     


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