Understanding homeowner loans
A lot of people need to take out a loan at some point, whether it’s to buy something pricey, to pay off various debts or to do something expensive like extend your home.
If you have a mortgage or own your own home, getting a loan can often be easier or less expensive, and you might get access to more money than someone who isn’t a homeowner. That’s because owning a home potentially gives you access to funds to pay the loan back if needed.
So what is a homeowner loan?
Secured homeowner loans, to give them their full title, mean you can borrow a lump sum of money against a property.
You need to make regular monthly repayments throughout the term of the loan, which could last anywhere between five and 35 years.
Who are homeowner loans suitable for?
The loans are generally for homeowners or mortgage payers who want to borrow bigger sums of money than they could with a standard personal loan. Our loan comparison page lets you compare loans up to £100,000. Providers might want you to have built up equity in your home, i.e. that you’ve paid off part of your mortgage or your home has gone up in value, so that this can be used to pay off the loan if you are unable to make repayments.
What should I look out for when taking out a secured loan?
There are a few things you need to understand before you commit yourself to this type of secured loan.
First, if you fall behind or stop making payments on the loan, the lender could take you to court and your house could be repossessed.
Second, this kind of loan usually has a variable interest rate, so it can be difficult to budget your repayments, as the rate could go up or down as the market changes. And if you've also got a variable rate mortgage, you could get hit twice if rates go up, so it’s really important to make sure you can afford your monthly repayments if they were to go up a few per cent.
And third, some lenders make it hard to pay them back,by imposing a penalty if you try and repay early. On the flip side, some make it clear that they won’t allow a ‘repayment holiday’ which is where you can request a break of a month or two if things are tight.
How can I find the best homeowner loans?
The good news is that it’s really easy to compare all different kinds of loans. Click below to look at the options for both personal and homeowner loans.
We don’t even need your personal details. Just put in either how much you want to borrow or the amount you can afford to pay back each month, and how long you’d repay for, and you’ll see a table listing all the options.
They’re listed in order of APR (annual percentage rate) which is the total amount that the loan will cost you including interest and charges.
One thing that’s worth looking at is the total amount payable, as this shows you how much you will ultimately be paying back over the term of the loan. Paying back a £30,000 loan over 15 years might cost you over £40,000 in the end. But if you paid it back over 5 years you might only pay £33,500.
So do try and find a balance between affordable payments and a short repayment period to avoid throwing money away.
Bad credit homeowner loans
If you have a poor credit history it can be tough to find a loan to accept you. And if you’ve got into debt before it might not be too sensible to get a loan at all.
That said, poor credit history doesn’t necessarily mean you can’t get a loan. On the loan quote page a number of providers are listed that say they will consider applicants with poor credit.
So if you’re looking for cheap homeowner loans, we can help you find a loan to meet your needs. Always remember, though, that no matter how low the APR, loans are always an expensive way to get access to money and there are some big risks, especially if you’re involving your home in the process.
Tightening your belt and saving up is a far better option if you can.
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