The Differences And Similarities That Exist Between A Secured Loan And A Remortgage
As many people will be aware, remortgages and secured loans are both means of raising funds, but other than that, the meaning of these two loans remain something of a mystery.
Here we intend to explain the difference between a secured loan and a remortgage, the interest rates they incur, their uses, and so forth.
The first fact to point out is that secured loans and remortgages both need to be secured on an asset which makes them different from unsecured loans which need no security of any kind.
A remortgage or secured loan can be secured on many different forms of collateral such as a business property like a hotel, restaurant, garage, care home or even an office block, etc. Some lenders even accept a plot of land as a suitable asset.
Generally however when talking about these loans, what springs most to mind is the residental homeowner loan.
Both remortgages and secured loans are mainly homeowner loans secured on the home in which the borrower resides.
The equity of a property is the thing that offers the collateral, and what equity is is the sum that remains when the outstanding mortgage balance is subtracted from the value of the property.
The biggest difference between these homeowner loans is the fact that a secured loan does not interfere with the existing mortgage, whereas a remortgage takes the place of the current mortgage, as well as placing it with a different mortgage provider.
Both these products can be used for all the exact same things, appart from the fact that secured loans never replace a mortgage.
Both can be used to pay for a vehicle, an expensive cruise, a home extension, an attic conversion or for almost anything a homeowner could ever want.
An excellent use for either of these loans is for debt consolidation, and clearly means the consolidating of all credit in high interest credit cards and unsecured loans into one repayment each month. The end result of using them as debt consolidation loans is the saving of hundreds or sometimes even thousands of pounds every month.
A secured homeowner loan has interest rates starting at 7.9%, and it’s cousin has rates from less than 2% for a tracker product and under 3% for a fixed mortgage deal.
When we are talking about the interest rates, it may appear unwise to consider secured loans, but there are ocassions when they are very much worth considering.
For example if someone has had their mortgage for many years, and has only a short time to go before it ends, a secured loan would normally be the better option, in the same way that it would if the mortgage payer was in a tie in deal with his existing mortgage provider, which would incur a heavy early repayment penalty.
No matter which loan is chosen by any particular individual, rest assured that they are both ideal methods of raising money when required.