You've no doubt heard the term 'homeowner loan' mentioned on television adverts. Maybe you've seen leaflets in your bank. But what is a homeowner loan?
Basically, it's what it says. It's a loan that is only available to homeowners. There are a couple of different types of homeowner loan, but the general idea is that homeowners can use their greatest asset – their house – as security. This means that if payments are not met and fall too far into arrears, the lender can repossess the house to cover their loss.
A mortgage is a type of homeowner loan, in the broadest sense. A mortgage lender pays the money for your house, you pay them back over 25 years or so, and you could lose your home if you don't keep up the payments. The difference is, a mortgage can only be used to purchase a home whereas a homeowner loan, also called a secured loan, can be used for just about anything.
Secured Loans typically depend on the amount of equity in your home. For example, if you have a £100,000 mortgage and have paid off £62,000 of that, your equity would total £62,000. Some lenders will take into account this equity when you apply for a secured loan, and will not let you borrow more than this. The average range of secured loan amounts is £5,000 to £75,000, and is most commonly used for renovations to the home – which in turn can also increase the market value and therefore the amount of equity.
As with any other type of loan, secured loans will depend on your credit score. However, since you are offering a substantial amount of security with your property, you are seen as a lower risk by lenders as they are virtually guaranteed to get repaid one way or another. Therefore, a homeowner with bad credit could get a secured loan easier than a tenant with bad credit could get a personal loan. Of course, the worse your credit score, the higher the APR on any loan, and this can vary between lenders, so get several quotes before completing an application.
Source:http://www.articlesbase.com/loans-articles/
secured-loans-explained-281627.html
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