With blooming FinTech industry of UK, you can find lenders extending 90-100 LTV against home equity you own. However, before you let the rabbit come out of the bag to tread pathway to debt free life, it is important to clearly understand how home equity loans work and what are the pros and cons involved. Irrespective of how much you could draw, find out if applying for homeowner loans is a viable choice for a borrower struggling with poor credit rating?
What are homeowner loans?
As the name suggests, homeowner loans are extended to home owners. Being an owner of a property, you are entitled to borrow more against your home despite the current mortgage. The loan is extended as a percentage to the balance home equity you owe. Thus, these loans are also popularly called as secured homeowner loans.
Just like personal loans you can use a homeowner’s loan amount for a variety of things. Most people use homeowner loans for renovating their homes or consolidating debts or other substantial projects involving cash.
With more and more lenders in the market, it is possible to locate certain lenders who can help you avail smaller loans as unsecured homeowner loans.
How Home Equity Loans Work?
The home equity loans work as second charge against your properly. The loan is extended owing to the share of homeownership you possess. Being a secured loan however in case of a default repayment you would also risk the home equity. The lenders can take you to the court and contest for sale of your property to clear their debts.
Loans for home improvement
From small renovations to major home repair plans can be funded with the help of home improvement loans. Many people with bad credit score or with low cash balance opt for homeowner loans for home improvement. For, being secured loans, they come with lesser hassles and at lower rate of interest.
Planned home improvements can indeed help them enhance value of their property and enjoy better rating. Thus, it can help the person with poor credit improve his financial health.
Debt consolidation loans
Likewise, homeowner loans can help bad credit borrowers manage their overwhelming debts by transforming their expensive loans into a single, affordable instalment. As a homeowner you are touted as a trustworthy prospective by the lender.
Are Home Equity Loans a Good Idea: The Pros and Cons?
Ready loans: By involving a high cost asset, your loan application gets the much-desired weightage by the lender and thus you have better chances of availing bad credit loans with home equity.
Low Rate: With security attached, you get loans at lower interest rate. This is one of the major causes for why people choose to involve their properties to avail a loan.
Less Hassles: There are lesser hassles involved and application is approved more conveniently despite the bad credit!
When you apply for consolidation loan, you are likely to extend the duration of your debt. Thus in many cases, homeowner loans can result in longer loans and that also boils down to more stress for more years.
Another major trouble you may face as a homeowner is protecting your rights on your property. You need to ensure complete repayment on time when you opt for homeowner loan. For, default of secured homeowner loan can initiate a legal battle against you.
All in all, homeowner loans are viable choice for those who are ready to meet their financial obligation