There are usually two kinds of loans: secured loans, and unsecured loans. Unsecured loans are the ones which do not require any kind of security that is to be assured to the loan lender. However, a secured loan is the one where the potential borrower would have to secure a guarantee or security against which the lender will lend money. Usually, secured loans are the better choices among the two because they come with many large and small benefits like lower interest rates – but you need to put one of your valuable assets as collateral. But you can easily avail a homeowner loan without using your property as mortgage. So, how do these homeowner loans work? In this article, we will discuss:
- What is an unsecured homeowner loan?
- How does it work?
- Features of an unsecured homeowner loan
- Why should you apply for it?
- How to choose the right loan?
What is an unsecured homeowner loan?
A homeowner loan can be taken by those who have a home in their name. With an unsecured homeowner loan, people can get a loan for a certain amount of the total value of the property without having to guarantee their property to the lender. One needs to be above 18 years of age and also should have a regular income source for being eligible for the unsecured homeowner’s loan. How does an unsecured homeowner loan work?
Homeowner loans are very common these days as come with certain benefits, which are beneficial for the debtors. The borrower who has taken the loan has to repay it along with the interest charge in monthly instalments. The interested party should check the availability of the loan along with the market conditions before taking out an unsecured homeowner loan. They should also make sure that they can pay off the loan every month. Loans can be requested on different types of property like flats, bungalows, cottages, houses, etc. Some of the things that the lender usually takes into consideration are the age of the applicant, the loan term they can pay for, the value of the property, the income of the applicant and their credit record.
Also, the rate of interest for these loans are either fixed or a floating rate of interest depending on the lender. Variable-rates of interest can be a bit expensive as compared to the fixed rate of interest in which the repayment instalments remain the same throughout the tenure of the loan.
Some of the important features of homeowner loans
The value of the loan will be a certain percentage value of the entire property which is negotiable in terms.
- The tenure of the loan will be stretched from 1 year to 7 years, depending on the value of the loan.
- The interest rate is either fixed or floating.
- There will be a thorough affordability check considering income and credit score, and then a determination of eligibility of the homeowner loan.
Usually, there will be certain lenders who might take a certain amount as fees for finalizing the loan. Research can be done before selecting the lender who is not charging any extra fees.
Some of the fees which are included in the homeowner loan are:
- Legal Fees
- Broker Fees
- Disbursement Fees
- Valuation Fees
After a lender and loan have been selected, several steps are to be completed before the loan is finalized. Usually, these steps can take 4-5 weeks, after which the loan amount will be transferred to the debtor’s account.
- The lender will check the credit record and make sure that the loan can be paid.
- The lender will then check the current pay stubs to determine an income’s regularity.
- They will then check the registry of the house to confirm the ownership.
- Lastly, they will calculate the property’s value and equity before finalizing the loan amount.
After the loan is granted, the monthly EMI’s of the loan will need to be paid. If you are paying off the loan early, a certain early redemption or repayment charge would be administered. Homeowners can also take a payment holiday with the lender’s approval, but in such cases, the cost of the loan will increase.
Why should people apply for homeowner loans?
Some of the reasons why people take homeowner loans are mentioned below:
- Funding: The money that you receive can be used to fund a large expense or a smaller one, depending on your needs. Also, you can use it for your wedding expenses or to fund your dream holiday.
- Business: They can start a business with their loan and invest in it with the amount. This will make the repayment of the loan easier because the returns can be used from the business to repay the loan and can also successfully secure the future of your business by investing in it.
- Home improvement: Renovations and improvements can be made in the home because usually, these renovations are expensive. To increase the value of the home, timely renovations and improvements can be very helpful to enhance the overall property value.
How to select a homeowner loan?
Searching for the right kind of loan can be difficult as there are many options to choose from. Some of the steps that should be taken while choosing a loan are:
- First, decide the amount to be borrowed for this loan.
- The next step is to calculate the value of the property according to the current real estate trend and by calculating the mortgage value that is still outstanding.
- After this, decide the number of instalments that can be paid every month and according to that, decide the term of the loan.
- Next, keep records like house registry, credit report, etc. available because these are needed by the lender to make their decision.
- Lastly, talk to a broker for getting a market viable homeowner loan on the property
In a competitive market, the expenses are high and thus at times taking a personal loan for homeowners becomes inevitable. People can get an unsecured homeowner loan for the value of the property without any guarantee, making the process of loans for homeowners much easier and less complex.
WHAT ARE 12-MONTH LOANS?
12-month loans are a type of short-term loan that has become increasingly popular in recent times. These are designed so as to last for only a year or 12 months to be precise. They are extremely helpful as they help one to accurately budget for the concerned money that they have borrowed as it is known that it must be fully repaid within a year or 12 months. This is the main difference that makes it stand out from other types of short-term loans offered by various direct lenders.
These types of loans allow one to borrow a wide range of different sums of money and these types of loans help break up the borrower’s loan into 12 manageable repayments that must be repaid on a monthly basis. Small loans are a good way of allowing one to budget for anything unexpected.
DESCRIPTION OF 12-MONTH LOANS
The approximate calculated interest for borrowing 100 pounds under such a scheme comes around 13 pounds per month. There are many people who may suffer from bad credit history and there are many lenders available who are willing to provide loans to people who have a bad credit rating and who may have been denied loans elsewhere. Most lenders have eligibility checkers that help check the individual’s likelihood of being fully approved for a 12-month loan for bad credit before applying.
One can improve his or her credit score by being accepted for a 12-month loan and keeping up to date with the necessary repayments for the concerned loan. This makes it easier for the individual to be accepted for any sort of credit in the near future. Missing out on payments has the opposite effect and can damage the borrower’s credit profile making it difficult for him or her to be accepted in the future for bad credit loans.
There are many UK lenders offering 12-month loans with no guarantor as not everyone may have access to that facility. These 12-month loans have become extremely popular in recent years as direct lenders have started offering these types of loans which do not require a guarantor.
GETTING APPROVED FOR A 12 MONTH LOAN
One is eligible for such loans only if he or she is above 18 years of age and is a citizen of the UK. Having a good income source is advantageous but not necessary. One also needs to have a good credit score to increase approval chances for the borrower. Lenders always prefer people with a good credit score as they can be trustworthy and reliable and are more likely to repay back the loan amount in the stipulated 12 months or 1 year.
If the borrower’s credit score is not enough for gaining approval for a 12-month loan, then the borrower can obtain loans by getting into a joint agreement which can be done by convincing a friend or family member to become your guarantor for the 12-month loan. In this case, if the borrower fails to make a repayment to the lender then the guarantor can pay in place of the borrower.
Asset pawning is also a good solution for the concerned individual or borrower. In case he or she is unable to find a guarantor then he or she can pawn any asset which may be a land, property or even a vehicle. This asset should have a value equivalent to the value of the loan.
BENEFITS OF 12 MONTH LOAN
Many lenders often provide people with 12-month loans even though they do not have a guarantor to furnish. This type of loan also helps those who are in need of emergency money. These loans are hassle-free and usually, do not carry any extra hidden charges and are also comparatively easier to repay when compared to personal loans or payday loans which have higher interest rates.
Most lenders nowadays have an easy loan process that allows them to assess the financial situation of the borrower within a short period of time and since most of the systems are now online, this has reduced a lot of paperwork involved. These lenders offer personalized loans to the borrower depending on their financial situation and state of living.
These lenders offering 12-month loans also provide competitive rates of interest to the borrower for people with a poor credit score and this helps a person from any strata of society with any economic background opt for a loan without being financially distressed due to the various competitive rates of interest offered to the borrower by the lender.
One can opt for a 12-month loan in case of any financial emergency or an unexpected expense that may be necessary to be cleared immediately. They provide quick loan approval processes and also credit the concerned loan amount directly into the borrower’s bank account making the loan obtaining process smooth and hassle-free. The borrower can easily repay the loan to the lender in simple instalments every month for the 12 months time period of the loan.
Even if the borrower has a poor history of credit and is in need of emergency money at the earliest, many lenders exist offering a wide variety of instalment loans for all types of credit score borrowers.
CHOOSING A 12 MONTH LOAN
One of the top reasons for more and more people opting for 12-month loans is the fact that it offers competitive APR, hassle-free and reliable loans with options for bad credit too, the lack of the need for a guarantor, availability of small and big loans as required, repayment of loans in easy instalments, ensuring that people from all economic backgrounds have a fair chance at securing a loan and many other reasons.
Carefully compare and choose the best suited 12-month loan option for your needs.
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