An explanation of IVAs / debt management

IVA stands for Individual Voluntary Arrangement. An IVA is a legal process in the United Kingdom (for UK residents) whereby you can arrange to pay debtors back a reduced amount of the money that you owe them, due to personal debts that are perhaps overwhelming. IVAs / debt management is usually available on debts of £15,000 and more. If you have a debt below this amount, you will often have to look for an alternative to IVA.

IVAs / debt management is an excellent option in many cases however it can not be used for debts related to a mortgage, a secured loan, Hire Purchase (HP) or utility bills so there are specific restrictions. It is important to ask about and inform yourself of the specifics of an IVA before applying for one.

The important things to note about an IVA is that once you enter into this type of agreement, you will typically no longer be contacted or hear from your original creditor. If you are behind on your payments and have been receiving daily phone calls, this alone can give you a huge amount of relief. Another key characteristic of an IVA is that once you enter into the agreement, interest and charges will no longer be charged to the account. This removes another level of pressure because it means your balance is set and will no longer rise on its own due to interest and fees.

An IVA agreement usually requires you to faithfully and reliably make the agreed payments for up to 5 years (60 months). If you stick with this agreement, the balance of your debt will be written off by your creditor. This agreement will be honored by your creditor if you honor the payment arrangement made between you and them in the IVAs / debt management arrangement.

Depending on your circumstances, you may be offered an alternative debt management solution if you do not qualify for IVAs / debt management. The information that you will need to find out whether you qualify to apply for IVA or other forms of debt management can be found on certain government web sites, if you search carefully. They can also be found on the web sites of debt management companies that specialize in helping people in debt. These companies will review your debts for you. If you agree to work with them they can at times negotiate solutions for your debts. One solution could be debt management where a debt management company will contact all of your creditors and negotiate lower payments for you if possible. At times, they can also negotiate a freeze of interest and other charges so that paying off your debts is easier.

Car Loans Vs Forecourt Finance

After their house, a car is usually the second most expensive purchase ever made by an individual or family.

Few people are in the position to pay for their vehicle in total from their own financial reserves and often some form of loan or finance is required. Finding the very best deal possible is usually critically important to the majority of car buyers.

There are a vast number of loans available for this purpose and the position can be complicated and difficult to understand. To simplify this, it may help to see these loans as broadly coming into three categories

• Personal Source Loans – the car purchaser obtains a loan from their own sources that are not directly related to the vehicle or the selling dealer. Examples may include a bank or building society personal loan obtained specifically for the purpose of buying a car.
• Manufacturer related loans – these are usually offered for new or recent second hand vehicles probably sold under manufacturer or dealer’s warranty. They may be intended primarily for the purchase of a vehicle of a specific make. So as an example, PEUGEOT Finance may specialise in loans for the purchase of Peugeot vehicles, and FORD Finance may specialise in offering loans for new or warranted second hand Ford cars and so on. These types of loans are normally made available through dealers who also may be linked to a manufacturer so a BMW dealership many specialise in selling BMW cars and may offer purchase finance through BMW finance. If a BMW dealer has a second-hand vehicle such as a NISSAN taken as part-exchange, then it is possible that in some cases BMW Finance loans may be available to purchase it as the dealer will wish to shift the car off their forecourt.
• Forecourt loans. These are usually offered by dealers selling vehicles and are provided through the services of third-party finance companies. These sorts of finance are typically not related to any particular make or model of car.

All three types of car loan schemes have their characteristics and potential pros/cons.

Banks.
Bank and related high-street product loans are sometimes a very cost-effective way to finance a car purchase. The usual credit checks with will be made and the bank will want to know that the applicant will be able to afford and meet the repayment schedule. If during the lifetime of the loan some problems with income arise, then banks and building societies may be among some of the more sympathetic lenders who will look to re-schedule the debt if they can.

On the downside, banks can be reluctant to advance loans for vehicles that are more than 2-3 years old at purchase. Based upon hard experience, they may also have a very pessimistic view of the residual value of a second-hand vehicle and as a result may ask for a significant personal contribution from the borrower by way of deposit.

Manufacturer Linked Schemes.
Most car manufacturers want to sell as many of their vehicles as possible and as a result may sometimes offer incentives such as low deposit schemes, cash back offers and payment holidays etc. Their interest rates can also at times be very attractive. Typically they will also have a more optimistic view of residual vehicle values so may advance more in the loan than a bank would.

It is worth being careful with the combined price of the vehicle and finance. Sometimes an individual dealership may be able to offer the car at a lower price if the buyer is paying via a bank loan (i.e. a cash buyer from their point of view) than they can if the buyer is taking their finance. The interest rate and cash back schemes may look very attractive, but in fact the dealer may be ‘recovering’ these offers in the minimum price for the vehicle they will accept.

Third-Party Forecourt Loans.
These deals are highly varied in nature and terms and it can be difficult to generalise. Typically though they do have the advantage that they may accept more marginal cases in terms of credit checks and also may be less strict in terms of demanding deposits. Some will also have a fairly favourable view of residual values and it may be possible to borrow slightly higher loan amounts. They can sometimes be one of easier channels for finding a loan for slightly more elderly second-hand vehicles.

It may be necessary to exercise some caution with these deals as some companies in this sector can charge much higher interest rates than banks or manufacturer schemes. Some also have a very low threshold of sympathy for borrowers in arrears and may seek to repossess a vehicle much faster than would one of the other scheme types.

In summary, as always with finance, shopping around is highly advisable.

• Car purchase loans obtained via banks may offer attractive interest rates and allow hard negotiation with a dealer as a ‘cash buyer’.
• Forecourt loans from a manufacturer’s scheme can offer attractive additional benefits and attractive interest rates but may in some cases be limited to certain marques or newer vehicles.
• Forecourt third-party loans may be easier to obtain than some others but their interest rates may be higher and they may repossess a vehicle quickly in the event of payment defaults.

A Brief Guide to Debt Consolidation Loans

Debt Consolidation Loans are marketed as financial products that will allow you to ‘bundle’ all your debts into a single loan, leaving you with a less complex debt burden and lower payments. This is the theory at least and it is true that many people enjoy exactly these benefits after taking out debt consolidation loans. It is important to note however that debt consolidation loans can sometimes be quite inappropriate as a means of debt management. It would therefore be a very good idea to investigate all your option before ‘putting pen to paper’ and signing up for one. The purpose of this article is to look at the possible advantages and disadvantages of debt consolidation loans as well as to point out some common pitfalls.

Advantages of Debt Consolidation Loans

The main advantage of debt consolidation loans is that they can reduce the amount that you spend every month on debt servicing. They will also help you to maintain an intact credit rating as they make negotiations about restructuring your debt with your existing lenders unnecessary.

These kinds of loans are therefore a good option if you are convinced that you have financial self control and are looking for a ‘once and for all’ option to help you pay off your debt.

Disadvantages of Debt Consolidation Loans

Some debt consolidation loans are new unsecured loans created from the consolidation of other unsecured loans. However the majority of such loans are actually secured against an asset (most commonly a home). This kind of debt consolidation could therefore put your home at risk if you do not keep up regular payments.

The fact that your debt is ‘stretched’ over a longer period, coupled with high interest rates, means that the final amount that you will be asked to pay will be very high. The bottom line is that it is quite possible that you will take longer to pay off your debt and that you will have to pay more to do so.

Getting the Most from a Debt Consolidation Loan

If you decide that you want to consolidate your debts, you would do well to keep the following in mind:

• Many debt consolidation companies make a lot of money on selling additional insurance to their clients. It would however in almost all cases be better to arrange your own insurance as you will very likely get better cover at lower rates if you do.
• It is unfortunately the case that there have been quite a few unscrupulous operators in the debt consolidation field in the past. It would therefore be worth your while to do a bit of homework on the companies that you are thinking of dealing with.
• Some companies use low introductory rates in order to mask the true cost of their products. It is therefore advisable to do your own calculations on how much interest you will pay over the life of the loan.
• It would in many cases be better to secure a ‘regular’ bank loan as a means to consolidate your debt rather than working through a specialist debt consolidation lender. It might therefore be a good idea to discuss your situation with your bank manager before making a final decision on a consolidation loan.

Managing Your Loan

Your sole objective in taking out a consolidated loan should be to use it as a means to get out of debt. Treating it like just another ‘line of credit’ and adding to the loan amount is a very bad idea, especially since you could put your home at risk by taking out secured debt at relatively expensive rates. Do your best therefore to ‘always put in and never take out’ once you have secured the loan.

Summary:

• Debt Consolidation Loans are a means of ‘bundling’ debt together in one package
• It can be used successfully as debt management strategy if managed correctly
• The main disadvantages are high cost and the risk to assets (e.g. the borrowers’ home)
• Thorough research is needed before making a final decision on taking out a debt consolidation loan

Secured Loans Vs Unsecured Loans.

Loans will in general come under one of two categories – those that are ‘secured’ and those that are ‘unsecured’.

This distinction relates to whether or not a lender wishes to take security or ‘a charge’ over something of the borrower’s in order to reduce their risks when lending. Secured loans are usually required when the item being purchased is of high value and the repayments made over longer periods.

In principle a secured loan means that the borrower will take the loan and offer the lender a guarantee that if the loan is not paid off when promised, then the lender will have legal right to take possession of a specified item of the borrower’s and do with it what they will.

This may sound a little complex but this type of this lending has been with us for centuries.

In a classic pawnbroker operation the pawnbroker will take a precious item and make a loan based on their assessment of its value. Although slightly different in that the pawnbroker holds the security physically for the duration of the loan, if the borrower fails to repay the loan within a specified period then the pawnbroker has the legal right to sell the item and recover the loan from the proceeds.

The purchase of a high-value piece of jewellery may work in a similar fashion. A loan would be taken out for the purchase and although the purchaser would in this case have the item in their possession from purchase, if they subsequently failed to maintain the loan repayments then the lender would have the right to seize the jewellery and sell it if necessary.

Another form of familiar ’secured loan’ is the standard mortgage. In this the lender will advance a sum to help purchase a property. As part of the legal details of the sale/purchase, the lender will have the right to repossess and sell the property should the borrower default on the agreed payment schedule.

There does not necessary have to be a direct link between the purpose of the loan and the security. For example, it may be possible to obtain a business start-up loan that is secured against a house or other asset. If the business fails and the repayments cannot be continued, then the asset used as security will be at risk of seizure and sale.

In the case of a secured loan, typically the lender will advance a percentage of their perceived value of an item and rarely more. In that fashion, with a car loan for a vehicle priced at £15,000, the lender may advance only a maximum of say £12,000 because this is what they may think the car will probably be worth if the lender defaults in say 12 or 18 months time.

The one significant exception to this are mortgages where, until the recent economic crisis, loans may have been available for 100% or even up to 125% of the valuation of the property – due to the lender’s assumptions relating to house price increases year by year. This practice has proven controversial and it is now almost impossible to obtain these high percentage advances.

By law any lender advancing a secured loan, whether secured on the item being purchased or any other form of security such as a property, must make this explicitly clear to the borrower.

Unsecured loans are, as the name suggests, loans that are not secured against any specific property or item. The lender will perform a credit reference check on the borrower and will consider whether the loan amount makes sense against the purpose. These types of loans are usually for lower amounts and as a result, the lender feels that they can accept the risk of lending without asking for a legal charge of security to be put into place.

Even with unsecured loans, unless the amount is very small, it will probably be necessary to provide proof of purchase and again, the lender may require some contribution from the borrower by way of ‘deposit’.

Secured loans may offer lower interest rates than unsecured, as the amounts are higher and sometimes the risks are lower for the lender.

It should be remembered that even with unsecured loans, if a borrower defaults on loan repayments then a court might order the seizure and sale of property to provide for the settlement of such debts.

Always check carefully the conditions of any loan taken out whether secured or unsecured.

• Secured loans are where the borrower has offered the lender a guarantee against a ‘security’ – this may be the item purchased or another item such as property.
• Unsecured loans are usually given for smaller amounts where the lender is prepared to take the risk without formal guarantees.
• Secured loans are usually for higher value amounts paid back over longer periods – they may offer lower interest rates than unsecured loans.

Debt consolidation loans

Having an abundance of debt and owing many creditors is extremely stressful. The long-term expense of making interest payments on high interest rate credit card and loan balances is also not the best approach to a successful financial future. As average credit card balances have soared and as consumers are faced with the reality of managing growing interest payment, the benefit of debt consolidation loans has become clearer.

Debt consolidation loans are loans that offer consumers the ability to reduce the number of creditors owed, cut the amount of interest in loan repayments, and make the debt repayment process more efficient. The consolidation loans often take the form of second charges on a home or a personal loan. By securing a loan with the leverage of your home as security, you can generally get a better credit rate from the bank. Having collateral property secured by debt gives the lender recourse in the event of non-repayment of debt. This makes the lender more flexible in rates and terms.

The result of a debt consolidation through a secured or non-secured loan is that one loan of a larger amount is used to pay off some, most, or all of your creditors that you have higher interest arrangements with. Ideally, this significantly brings down the average interest rate you pay on the balance owed. Lowering your interest rate can reduce your monthly loan payments and increase the amount of payments allocated toward principle repayment. This leads to more easily managed monthly budgets, or perhaps a more efficient repayment of debt.

Debt consolidation loans are usually spread out over the course of years, depending on the type of loan, the lender, and the balance. The more spread out the loan repayment, the less is required for each monthly payment. However, if the goal of a debt consolidation is to lower interest payments and make the loan repayment more efficient, you may opt for a shorter repayment timeframe with a faster repayment of your principle balances.

As mentioned, there is a lot of stress involved when people owe money to many creditors. It is harder to work with creditors for specialized situations when there are several to deal with. Plus, keeping up with all of your monthly payments and getting the payments in on time is difficult if you have several banks and credit card companies that you owe money to.

It is important to consider the up front costs of obtaining debt consolidation loans. There are usually loan application and other fees charged for the acquisition of a new loan. Second charges against your home may also come with other loan fees. To consider the benefits of getting a new loan, you must figure out how long it takes to make back the money invested in acquiring the new loan. The higher your debt and the more creditors you owe, the more sensible a new consolidation loan becomes. Do keep in mind that the loan balance does not disappear; it just takes on a new form. Debt consolidation is not a substitute for proper money management and credit responsibility.

Finding the Best Way to Purchase Your Next Vehicle

Stepping into a motor dealership can sometimes feel like entering a parallel universe. First there is the amazing array of technical terms describing automotive specifications to deal with. It does not stop there however. Choosing the right way to finance a new car can be just as confusing. There are so many products, each with a different set of pros and cons to consider, that it is easy to feel overwhelmed by the whole experience. This need not be the case however as having just a basic understanding of the different ways in which to finance a vehicle purchase will go a long way towards helping you to make the right decision. The purpose of this short article is to highlight some of your options:

1. Hire Purchase: Under this option you will pay a monthly instalment over a fixed contract period (usually around 42 – 60 months). During the contract period you will have full use of the vehicle but it will still technically be the property of the finance company (or in some cases the dealership) through whom finance was arranged. At the end of the contract period full ownership will revert to you. The main benefits of hire purchase is that it is relatively easy to arrange (it can the done in the dealership in most cases) and the fact that the interest rates are generally quite competitive.

2. Remortgaging: If you have sufficient equity in your house you mortgage provider will, under certain circumstances, allow you to remortgage in order to fund major purchases. The main benefit of this approach is that you will get a very good interest rate when compared to other options. The main disadvantage is that you will spend a very long time paying off your vehicle.

3. Interest-free Finance: Some car dealerships offer interest free finance on brand new vehicles. This is obviously a very attractive option that can save you a great deal of money over the contract period. The main disadvantage of this approach is that it is very difficult to get a discount on the purchase price if you opt for it. It is therefore to ‘crunch the numbers’ to work out whether negotiating a discount and then making use of another finance option would not be more beneficial.

4. Personal Contract Purchase: This is a kind of lease agreement where you make monthly payments allowing you full use of a vehicle over a set period. At the end of the agreement you can hand the vehicle back or make a final payment to purchase the vehicle outright

5. Personal Loan: It is sometimes possible to negotiate a substantial discount if you pay cash for a vehicle. It is possible to make use of this while still financing your car. This can be done through taking out a personal loan through a bank or building society and using the funds to purchase the vehicle. Since the vehicle purchase and the financing are arranged separately it will to all intents and purposes be treated as a cash transaction by the vehicle dealership.

6. Car Loan: Some financial institutions offer products that are specifically aimed at those purchasing vehicles. While essentially a personal loan this kind of product will include certain motoring related benefits (e.g. pre purchase inspection, membership of a breakdown service etc.) to make it more attractive to those buying vehicles.

It should be clear from the above that the options open to those wishing to purchase a new vehicle are varied and aimed at different needs. You should therefore be able, after you’ve done a bit of homework, to find a product that is just right for you in your particular circumstances.

Summary:

There are many different finance option open to those wishing to purchase a new vehicle. These include:

• Hire Purchase
• Remortgaging
• Interest-free Finance
• Personal contract purchase
• Personal Loan
• Car Loan

A Way to End the Downward Debt Spiral: Debt Consolidation Loans

People who are heavily in debt often describe their situation as akin to ‘drowning’. This does not only have to do with sinking under the actual sums involved but also with trying to keep track of what they owe to whom and when! The fact is that that ‘loans breed loans’ as people try to use new lines of credit in order to pay off existing ones. One way to break free from this vicious circle is to take out a Debt Consolidation Loan.

A debt consolidation loan is simply a loan that allows you to pay off all of your existing debts, leaving you with a single monthly repayment. For example, if John holds three credit cards, 2 two store cards and an overdraft he can use a debt consolidation loan to turn his six repayments into one. There are many advantages to this approach. Some of them include:

• A possible reduction in the total monthly amount spent on debt servicing
• Better interest rates, especially if the debt being consolidated is held on credit cards.
• The convenience of having one monthly repayment instead of many.
• The ability to reduce your monthly repayments without damaging your credit rating.
• The ability to budget with more accuracy as loans are issued for a fixed term with fixed (depending on the interest rate) repayment amounts.

Although debt consolidation loans can be a very important tool in reducing overall indebtedness it should be noted that it is not a totally risk free option. Some of the things to keep in mind are:

• Debt consolidation loans are often secured against the homes of borrowers. Defaulting on a debt consolidation loan could therefore have a serious negative impact on the security and wellbeing of your family.
• If your debt is already totally out of control it is unlikely that use of a debt consolidation loan on its own will be sufficient to get you away from the brink. In such cases it might be a better option to negotiate an Individual Voluntary Arrangement (IVA)
• The fact that debt consolidation loans are measures of early intervention rather than ‘solutions of last resort’ is further underlined by the fact that a damaged credit rating could make obtaining such a loan very difficult and expensive.
• It is often the case that your existing lenders will charge you early repayment penalties and various other fees if you pay off your debts with them before the loan terms have run their courses. It would be worth your while to find out what these fees will be (if applicable).

The great value of debt consolidation loans lie in the fact that they can be very effective in preventing an escalating problem from spinning out of control. As such they are the perfect products for people determined to make a fresh financial start before things get out of hand.

Summary:

• Debt Consolidation Loans is a way to combine all existing debts into one loan
• The benefits of debt consolidation loans include: possible lower monthly repayments, lower interest rate and simpler financial management
• It could sometimes be unwise to take up such a loan. This is especially true in cases where debt levels have reached a ‘point of no return’.
• Debt consolidation loans work best when they are used for early intervention

Bridging that finance gap

Bridging finance is a short term loan for a property buyer who can’t complete because of a problem in the chain behind him.

A bridging loan allows the buyer to proceed with the purchase while the other problems sort themselves out behind them.

The downside to bridging is the buyer is often left with two loans – a mortgage on the property they are selling and the new bridging loan on the property they are buying.

Banks and specialist lenders provide bridging loans. The deal is generally based on the property offered as security but the interest rates will be higher than an ordinary mortgage and the loan-to-value lower – perhaps only 70% of the value of the property.

The key to borrowing on a bridge is the ‘exit strategy’, which is how you will pay off the loan.

Most borrowers exit strategy is to replace the bridging loan with a mortgage as soon as they can.

The problem is you have to be absolutely certain you will complete the sale of your former home and have a mortgage in place on your new home before contemplating a bridge. If you are not in absolute control of both ends of the deal and cannot guarantee an exit strategy, you should not consider a bridging loan as the lender my take possession of the property if your plans fall through.

Bridging loans come in two types:

• Closed bridging is for a time limited period like a week, a month or three months – useful if the completion date for your old property is set.

• Open bridging has no time limit and often attracts a higher rate of interest.

Expect to pay fees as a percentage of the sum borrowed. You will also have to budget for paying both your own and the lender’s solicitors, a valuation and possibly a broker fee as well.

A typical bridging loan is at least 1% above bank base rate and can be much higher depending on the lender and how they view the risk.

An alternative to a bridging loan is a ‘let and buy’ mortgage. With this product, you keep your existing mortgage on your old home but tell the lender you are converting to a buy-to-let product, which may cost you a little more in interest repayments.

You let the property to a tenant and the rent you receive pays the mortgage. Meanwhile, another lender gives you a mortgage on your new home based on normal lending criteria.

A ‘let and buy’ mortgage may be advantageous because you can sell your former home at your own pace and this gives you a capital gains tax advantage because the last 36 months of ownership of a property that has been your main home is exempt from CGT when you sell.

That means providing you lived in your former home for all the time you owned it less 36 months, you pay no CGT when you sell. You can also afford to sit out any drops in the market and wait for a better price.

You also have a capital gains tax exemption on your new home at the same time.

Bridging loans are expensive, last resort borrowing and you should take financial advice and consider carefully before entering in to an agreement.

Summary

• A bridging loan is short term finance available from banks and specialist lenders

• The interest rates and fees are generally higher than other borrowing because the lender knows you have nowhere else to go

• Consider a ‘let and buy’ mortgage as an alternative as the rates are cheaper and the you pick up capital gains tax advantages

What is a Bridging Loan?

Picture the scene. You’ve found your dream home, you’ve put in an offer, and the current owners have accepted. However, your house is yet to be sold, and your plans for your new home might fall through at any moment if the sellers receive a better offer. You have to move as quickly as possible to make sure you stay in the game. What can you do?

A common response is to use what’s known as a bridging loan. While it might help you keep hold the property you want, it’s important to note that they’re usually expensive, and can leave you in a bit of a financial mess should the whole thing fall through; even if they work, you’re left paying off a loan (usually at a high interest rate) in addition to a mortgage on your new house until your old house sells. As a result, they should be considered a last resort, and not just a way of quickly getting out of general property-chain problems.

Generally speaking, there are two different sorts of bridging loan: ‘closed’ loans, and ‘open’ loans. To be eligible for a closed bridge loan, you must have already agreed to an exchange on the sale of your current house. It’s very rare for sales to collapse after an exchange, so financial institutions feel pretty comfortable about offering closed loans in this situation. However, open bridges are necessary for those customers who are looking to buy a specific property, but might not yet have put their current home up for sale. To get an open loan, you’ll need to have a lot of equity built up, and be willing to answer a whole host of questions from your bank.

One major advantage of a bridging loan is that they don’t generally include penalties for early repayment, while some mortgages do. As such, you can pay off the remainder of your loan the second the sale of your house goes through, without incurring any additional fees. However, as they’re only designed to be a very short term solution to the problem (with most banks limiting the loan length to 12 months before calling it in for renegotiation of terms), the interest rates attached to these loans are often quite high – usually between 2 and 2.5% above the Bank of England’s base rate. You can expect an arrangement fee to be applied as well (often about 0.75% of the loan). This can be off-putting for some buyers, but doesn’t necessarily have to cost you a great deal extra, especially if you can get the sale on its way as soon as possible.

Bridging loans aren’t for everyone – some people may find that remortgaging their property and renting it out until the deal can go through is a better option, especially if they suspect that it may be some time before they’re able to sell their current property – but it can be a useful tool in the short-term, especially if you find yourself at the mercy of a small hiccup in the house-selling process that will be relatively easy to resolve, or at times when the housing market has fallen a little slack.

What are homeowner loans?

Homeowner loans, as the title suggests, can be applied for by people who actually own their home, ie they are not renting where they live and have a mortgage on the house, or they own it outright. These loans can usually be applied for quite large amounts, in the tens of thousands of pounds, so they can be useful for big projects or outlays on expensive items like cars.

A homeowner loan can sometimes also be known as a secured loan. This type of borrowing is literally secured against a property, ie your home is offered as collateral or as a guarantee that you will pay the money back. If you can’t pay back the cash and struggle to keep up with repayments, the provider can repossess the home or part of it in order to get back what they have lent you.

Secured loans do not always just apply to houses, occasionally other things like cars can be used, particularly if the money itself has been used to purchase the vehicle.

Secured or homeowner loans can sometimes be used for debt consolidation, meaning someone can get quite a large amount from the provider, use this money to pay off a number of debts they might be having difficulty with, and then have the benefit of being able to concentrate on one large loan. Because a home is used as a security in the deal, lenders are usually quite prepared to offer larger amounts, up to around 25,000 pounds, for example.

As with all types of borrowing your provider will expect to receive interest. This is also known as APR or annual percentage rate. This rate will vary depending on the market in general, the value of the actual home being offered as security, the individual company’s attitudes towards the applicants, and also a straightforward credit rating. Some consumers may have noticed that there is a small print catch attached to advertised APR rates, saying ‘typical’ or ‘variable’. The typical part applies to the fact that rates can go down and up and one which is on all the promotional material might apply to the average consumer and not to every individual who applies.

Although you can compare quite a large range of secured loans quite quickly through websites and brokers, sometimes the best way to shop around and find out what is out there is to apply for a number and look at different rates that different providers are prepared to give you.

It is also worth bearing in mind that homeowner loans availability can change depending on the financial climate, and house prices can sometimes dictate how much is available and at what rate. The lower someone’s house falls in value, effectively the less security someone is offering when they apply for such a loan. However, this form of secured loan remains one of the most effective ways to borrow a large amount of money, and finding the best rate over the best payment period is usually the most effective way of getting a good value one.

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