Secured loans and remortgage deals can be surprisingly easy to access. Just as long as you own your own home (or at least part of it), you’ll most likely qualify.
But which of the two should you go for? What are the main differences between standard secured homeowner loans and a remortgage deal? In what kind of circumstances would either of the two prove useful?
Remortgaging Can Cut Borrowing Costs
Examining remortgage products first, remortgaging provides homeowners with the opportunity to effectively ‘swap’ their current mortgage for a better deal. It’s not uncommon to find competing lenders offering remortgage deals at considerably lower rates of interest than your existing home loan. In which case, it may be worth considering the savings, if you were to switch.
If they choose to do so, the applicant could request slightly more money than they need to cover their outstanding mortgage. A good way of raising funds for home improvements, alterations, extensions and so on, spreading the costs over a series of monthly payments.
A good remortgaging deal can therefore significantly reduce overall borrowing costs for the customer. Lower interest rates, more competitive borrowing costs and the opportunity to raise funds for home improvements. The only issue with remortgage products being their somewhat complex and restrictive nature.
For one thing, arranging a remortgage can be almost as challenging and time-consuming as applying for a traditional mortgage. In addition, lenders tend to be very selective with regard to the loan’s intended purpose. More often than not, you’re restricted to home improvements and alterations etc. with a remortgage.
If a remortgage product is granted, the borrower continues to have just one loan secured against a property, with one monthly repayment obligation to fulfil.
Secured Loans Can Be More Flexible
On one hand, you could argue that secured loans are typically more expensive than remortgage products. However, they can also be advantageous in many ways.
First and foremost, organising and accessing a secured loan can be surprisingly easy. Depending on the type of secured loan you choose, the money you need could be in your account within a matter of days. There’s also far more flexibility with repayment options - short-term and long-term repayment periods available.
In addition, there are typically very few restrictions imposed on the intended applications of secured loans. The vast majority of secured loan specialists are only interested in the provision of sufficient collateral to cover the cost of the loan. If you’re deemed eligible, it doesn’t matter what you intend to spend the money on. Speaking of collateral, it’s also possible to qualify for a secured loan using a variety of valuable assets - not just residential or commercial property.
Poor-credit applicants may also find they have better luck with a secured loan application. Many specialist lenders choose not to perform credit checks on prospective customers.
On the downside, a conventional secured loan using your property as collateral will result in two loans being secured on your home. Rather than the usual single monthly repayment, you’ll have two loans running concurrently to pay off.
Finding the Best Deal
Ultimately, only you can decide whether a secured loan is a better option than a remortgage, in accordance with your circumstances and your budget. Using a secured loan calculator online can be a great way of assessing the available options. After which, it’s worth taking your business to an independent broker and organising a complete market comparison on your behalf.
With remortgage deals and secured homeowner loans, your property may be at risk if you fail to keep up with your repayment obligations. It’s therefore important to carefully consider your requirements and your financial position before applying.
Article by iConquer