There are huge celebrations on whether it is wise to draw secured homeowners loans with bad credit or not. While one school of thought favours the low-cost factor of the secured loans, the other school binges on benefits of unsecured loans. The idea of no influence on the ownership of your home on non-repayment is what amuses the latter faction of people in favour of unsecured loans for poor credit.
Let’s explore in length about the two forms of borrowing and try to reach a definitive answer for anyone who seeks homeowner loans to get rid of poor credit situation.
Being a person with home equity you enjoy following benefits as a borrower:
- Your loan application is preferred over the one who lives on rent.
- You get to borrow fatter loans with lesser hassles.
- You get a better rate of interest for homeowner loans.
- You get more freedom in choosing the loan repayment plan according to your credit situation.
Secured Homeowner Loans
When you decide to use home equity for drawing a loan, you are eligible to draw up to Loan to Value of current home equity. These loans are raised by those who have long outstanding bad debts or have bigger home improvement projects to fund. By incurring a home improvement, you would increase worth of your property and would thus diminish the burden of a loan on your shoulders.
By raising a loan against property you share the risk associated with your loan and thus you get a better rate of interest. However, there is a cliché attached here. If you fail to repay the loan, the lenders can challenge the ownership of your home and you may lose your property rights.
Unsecured Homeowner Loans
Those who do not want to take any risk, opt for unsecured personal loans in the UK. You can use the amount for any of the purposes discussed above. However, the rate of a loan would be higher and you would be spending too much on the interest amount.
Secured or Unsecured?
Knowing the pros and cons of both formats of loans, you should assess your credit situation so as to make up your mind.
Before making up the mind, you should always have a repayment plan in place. You must calculate how much you could save every month. The more comfortable you are paying out the loan instalments, the more likely it is to repay the loan on time.
Be it an unsecured loan or a secured one, when you borrow for mending bad credit situation it is important to stick to your repayment plan. You should strive hard to ensure timely payments every time.