It has been announced that unsecured loans are at their most expensive since 2001 which may come as a surprise to many.
Why this is surprising news is that in 2001 the Bank Of England Base lending Rate was 6% and now, as everyone knows, it is at an all time low of 0.05%.
Unsecured loans therefore should be, if anything, less expensive than they were nine years ago but this is however not the case.
A major reason for this is that unsecured loans are, as their name clearly suggests. People sometimes fall into arrears with their unsecured loans choosing when money is tight to pay secured loans such as their mortgage first, and lenders can therefore sometimes lose money.
This has happened a lot over the past three years as many people have seen their firms close down at the cost of their job.
The underwriting criteria is strict as regards unsecured loan in addition to the fact that interest rates are now higher than at the start of the decade. to have any hope of being granted this product.
For homeowners a great alternative to the unsecured loan is the secured loan otherwise known as a homeowner loan, obviously called these two names as the loan is secured on property and as such is only available to homeowners.
As a secured loan is naturally secured on a solid asset, the secured loan lender is more certain that his loan will be paid back, and as such a secured loan is more readily obtainable than an unsecured one.
When applying for an unsecured loan the applicant must produce proof of what he requires the loan for, and it is not simply a question of filling in the purpose of the loan on an application form.
If a an unsecured loan is to pay for home improvements for example the lender will require proof that this really is the purpose of the loan in the form of several estimates.
With a secured loan, the borrower simply states the purpose of the loan on an application form and no additional proof is required, and this allows the applicant to have cash in hand in advance to obtain the best deal for his new kitchen.
Another advantage with the secured loan is that repayments can be spread from five years to twenty five years making the repayments comfortably affordable to most, compared to unsecurd loans with maximum repayment periods of nomally three years and sometimes five years.
As homeowner loans are secured, the underwriting criteria, even on full status plans is still less strict than the criteria for the other product making the acceptance rate for secured loans much lower.
Remortgages have all the same advantages as secured loans making a remortgage another suitable alternative when a homeowner wants to borrow a flexible financial product at a good rate of interest.
Remortgages start with an interest rate of 1.98% and can be repaid up to twenty five years and with some lenders such as the Halifax uo to forty years.
Therefore when a homeowner wants to borrow, a remortgage or a secured loan are often the best choices.
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