Common misconceptions of secured loans
Borrowing money is a significant step that many people will be required to take at some point in their lives.
But, there are numerous misconceptions people have about it, which can make taking out a loan a daunting and uncertain experience.
In particular, secured loans have a wealth of information circulating online that is false. This could result in many people being reluctant to take out this type of loan when they actually need it.
For this reason, we are going to address some of the common misconceptions, to ensure that people have all the details they need to make informed decisions when it comes to borrowing money.
1. Secured loans are just for debt consolidation
It is a common belief that secured loans are only for people who need to consolidate debt.
Although this is one of the primary uses of this type of loan, it is not the sole purpose.
They can actually be used for multiple different reasons including: debt consolidation, big purchases, home improvement projects, paying tax bills and any other legal purpose.
Therefore, the assumption that these loans are solely for people with debt consolidation needs is inaccurate.
2. Secured loans are primarily for people with adverse credit
With a secured loan a person’s property is used as security, which helps to reduce the level of financial risk to the lender.
Due to this, many people hold the assumption that these loans are only for people who are a higher financial risk to lenders, including those who have adverse credit.
In fact, they can be used by any person who is eligible and passes the lender’s qualifying criteria.
3. You should accept the highest amount of money offered to you
Brokers and Lenders will carefully assess people’s circumstances and ability to repay the loan, now and into the future, to determine how much they should lend to the person.
Therefore, the loan offered can sometimes be higher or lower than the amount of money the person initially needed to borrow. It is important to only borrow the amount required.
4. Your credit history cannot be improved
Another misconception that circulates is that once your credit history is damaged, it cannot be improved in the future. This is entirely false.
People can take a variety of steps to improve their credit history and diminish any negative marks that may be against them from the past.
One of the main methods that can be used is ensuring that going forward all credit repayments are made on time
Although this process may take some time and will not be an overnight fix, it can be achieved.
5. There are hidden fees and costs involved
The regulation governing the sale of secured loans is the same for all mortgages. This means that the company has to clearly highlight any fees and costs that may be involved when taking out this type of loan.
Therefore, the belief that there are lots of hidden fees and costs is untrue.
Overall, there are many different beliefs people hold about borrowing money, particularly when it comes to secured loans.
As this blog has highlighted, many of these assumptions are false. So it is important when taking out any type of loan, to make sure you research beforehand and ensure you understand what you are doing.