Two forms of loans are unsecured and secured.
Unsecured loans, as the names makes more than clear, require no form of security whatsoever, and as such are available to both those who do not own their own property, that is, tenants, and also to homeowners.
It has never been easy for tenants to obtain loans at any time in history.The main reason for this is that as these loans are not secured against any asset they are considered as a bit risky for the company advancing the unsecurd loan.
For homeowners unsecured loans were slightly easier to obtain, although the maximum loan was normally restricted to around £15,000 which is often not an adequate amount if the loan is required to fund a major purchase such as a motor home, or to pay for subtantial home improvemnts such as a conservatory, an extension, a swimming pool and so on.
Tenants have no option but the unsecured loan but for homeowners the situation is very dufferent as they also have the choice of homeowner loans.
Homeowner loans are only available to homeowners and they are an excellent way to fund almost anything. Homeowner loans are also called secured loans as they are secured on the equity of the property.
Unlike before the recession, homeowners cannot obtain a secured homeowner loan if there is no equity on the property.Equity is the difference between the value of the property and the balance left on the mortgage.
To give an example of the above, if a property is worth £200,000 and the mortgage is £190,000 the equity is in fact £10,000. Equity margins have been restricted nowadays and secured loans are only available at a maximum of 80% and 70% for employed and self employed borrowers respectively.
If a property is worth £300,000 and the mortgage balance is £200,000, the maximum available homeowner loan would be £40,000 if the applicant is employed and £10,000 for a self employed borrower.
Before the credit crunch 125% equity plans were available but only to employed borrowers with a good credit rating, and in those golden days of yore if a property was valued at £200,000 and the mortgage outstanding was £190,000 homeowner loans of up to a maximum of £60,000 were available.
Unsecured loans are more expensive than secured loans and homeowner loans have interest rates commencing at around the 9% mark.
As these loans are secured, lenders are not concerned about and never require proof of the purpose of the loan, unlike with unsecured loans.
With unsecured loans to be used say to buy and fit a new kitchen, it is not simply a matter of stating to the lender that you intend to buy a new kitchen as he will require proof in the shape of several estimates.
With homeowner loans it is only a matter of stating the purpose for the loan on the application form and no proof will be asked for, making this a simple way to borrow money.
With secured homeowner loans you will have cash in hand to obtain the best possible deal whether it is when buying a car, doing homeimprovements, etc.
One of the most common reasons for obtaining a homeowner loan is to consolidate credit cards, personal loans and hire purchase.With the interest rate for secured homeowner loans being so much lower than credit cards, etc. there are massive savings to be made, and in addition to saving money the homeowner will have only one payment to make each month compared to several making finances easier to handle.
The only really sensible way for a homeowner to obtain a loan is via the secured homeowner route and these loans can be used for any legitimate reason.