A Beginner’s Guide to Homeowner Loans

The idea of taking out a personal loan may be quite daunting for many of us, even if we are struggling financially. However, this method of borrowing is often cheaper as compared to credit cards and overdrafts. These loans are fairly popular because while borrowing the money you do not have to offer any form of security. Simply, put these are unsecured loans that need no collateral or guarantor to be borrowed. Generally, the lender makes their decision to lend money basis on your creditworthiness and loan affordability. Homeowner Loans are a type of unsecured loan – there are different names for an unsecured loan such as home improvement loan, wedding loan, holiday loan, car loan, etc. That means the nature of these loans are same, however, they are just advertised under different names and requirements.

All the key information has been collated in this guide to the basics of a homeowner loan that will help you to understand whether a loan is a smart financial move for your situation. We will discuss:

A homeowner loan is an unsecured loan that is not tied to any of your personal properties or other valuable possessions. If you are looking to borrow a homeowner loan, you can borrow between the range of £1,000 and £35,000 for a minimum period of a year which can extend up to seven years. If your loan application is approved by the lender, the money will be transferred by them to your bank account. If you fail to make the repayments on time then your credit score will be damaged and you may face a lot of trouble to find another loan for the next six years. Moreover, after a certain number of defaults, the lender may take legal action against you wherein you may be issued with a County Court Judgement (CCJ).

What is the Rate of Interest That you Have to Pay?

Generally, the rate of interest for these No Guarantor Loans are higher as compared to secured loans as no collateral or guarantor is involved. The lender willingly takes the risk by lending without any security. The rate of interest is set by the lender and it depends on various factors such as:

•      Your credit score
•      Your monthly income
•      Debt to income ratio
•      Loan size
•      Length of loan

Also, different lenders have different criteria for setting an interest rate. The Annual Percentage Rate, abbreviated as APR is offered to only 51% successful applicants and the rest of the applicants will be offered a higher rate than what was initially advertised.

Different Uses of a Homeowner Loan

Loan for Homeowners can be opted for an array of different reasons if you are thinking to start a commercial venture using a loan, then a personal loan is not the right option to fund your business. Several uses of this loan are listed below:

•      Debt Consolidation: You can use this loan to merge all your existing debts into one – this will help you in simplifying your debts.

•      Home Improvement: This can be used to make necessary improvements to your home such as boiler replacement, loft conversion, kitchen upgrades, etc.

•      Finance a Wedding: It may be used to fund the expenses of your wedding if you are facing a shortfall.

Final Thoughts

Can you afford it? That is something you must always ask yourself whenever you are considering the decision to borrow money. If you can afford all the repayments on time and in full, then a personal loan can prove to be an essential financial tool during emergencies.