Tuesday, March 20, 2007

Homeowner Loan - model loan for the homeowner

Secured loans are generally termed homeowner loans. This is because the collateral used for homeowner loans are typically homes. However, in truth, collaterals can be anything of value. With a homeowner loan, interest rates can be variable, unlike unsecured loans where rates tend to be fixed.

With homeowner loans, one can get a longer repayment term as well. However, the borrower may also have to pay extra charges, like a property valuation fee.

The interest rates are comparatively lower with a homeowner loan. This has mainly to do with the presence of collateral in the case of this loan type. The collateral assures one thing to the lender – the loan will be recovered one way or another. If the borrower defaults, the collateral can be sold off to recoup the loan amount.

The greatest benefits with a homeowner loan are that the money offered can be repaid over a distinctly greater time period, in comparison to unsecured personal loans. The repayment period can stretch up to thirty years. The amount borrowed is dependant on the equity in the house. There are cases where the borrower can get more, but that usually warrants elevated interest rates.

Of course, the elongated time-frame engenders a lot of other benefits for the borrower. As the loan can be paid back over a greater duration, it becomes easier to manage the monthly outflow. This assists in supervising the finances better. However, there is a downside to this. Should the loan not be repaid in time, there is a clear chance that the borrower could lose his home.

There are several avenues to procure a homeowner loan. While the traditional banking institution is still a major player in this regard, other options are coming up too. Private lenders are one. The other is the online option, which is arguable the best in terms of choice and customer convenience.

Summary: A homeowner loan necessitates the borrower to put up collateral – his home - as security. These loans have a longer repayment term, and come with slight lower monthly instalment rates than unsecured loans.