The credit crunch has clearly dealt the housing market a severe blow, and things don’t look like likely to pick up in the very near future.
Reports of house prices stalling, and even declining are increasingly common, and the market is ever more moving in favour of the buyer assuming they can get a mortgage. Consequently the option of simply staying put and doing up your existing property is increasingly attractive.
Unfortunately, even choosing to tackle the work yourself will require a hefty lump sum, and with borrowing currently a delicate business getting the ideal loan may be tricky.
MoneyExpert.com gives some top tips on the secured loan market.
It’s not all bad news
Clearly the credit crunch has had an adverse affect on the loans market, with lenders ever more wary of bad debt. That said, there are still options available, and as long as you’re fully aware of your own financial situation you should be able to find a product to suit your needs.
Offer some security
A secured loan is a loan which uses your property as collateral against the risk of you defaulting on your payments. The downside is clearly that in a worst case scenario, where you are unable to make the payments, you risk having your home re-possessed.
The up-side is that offering additional security to the loan provider will put them in a better position to offer you a good deal on a loan.
Analysis of the loan market by MoneyExpert.com reveals that the differences in rates between a secured and unsecured loan, one where you offer the lender no security, are significant.
Despite Bank of England cuts in the base rate the trend in the loan market has been upward but a secured loan is almost certain to offer you a better deal. One of the best rates on a secured loan from £5,000 is from Sterling Credit with a typical APR of 6.8%. At the top end of the non-secured loans market you’d be looking at typical APRs of at least 8%. Tesco Personal Finance, for example, offers a £5,000 loan over 3 years at 8.9%
The lowest rates are only going to be available to borrowers with a strong credit rating. If you’ve failed to make a credit card or loan repayment in the past then you may struggle to get such a good deal and might have to opt for a higher rate from the likes of Intelligent Finance at 9.4%. At this rate a £5,000 loan over a 5 year period would involve monthly repayments of £159.93.
It’s important when you’re making an application to be aware of which loans you’re likely to be accepted for. If you find yourself being turned down for repeatedly your credit rating will be adversely affected and you and the entire process will be made even more difficult.
Think before you sign
Taking out a loan is a big commitment and not one to be taken lightly, particularly when your home is being thrown in as part of the deal. You should always think first about how you’d structure your repayments in an affordable way. If you’re able to do this then taking out a secured loan could be an ideal way to finance home improvements as a great long term investment.