Glossary of Secured Loan terms
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- Fixed Rate Loan
With fixed rate loans the interest rate to be charged is set at the start of the loan and is guaranteed to remain the same throughout the duration of the loan. At times when interest rates are generally viewed as being low, these loans are a great idea because you know that whatever happens to the economy and interest rates, your loan repayments will remain stable. Loans of this type are often not advertised as being fixed because this approach is applied to most small loans taken out over short periods.
- Flexible Loan
The benefit of a flexible loan lies in the nature of the repayment scheme and how you can vary your repayments to suit your changing personal circumstances. These are ideal for people who are self-employed and may have irregular levels of income. Flexible loans will be slightly more expensive than loans with fixed repayment schemes. As well as changing the repayment amounts you may also be able to take a repayment holiday, where you stop repayments all together for a short period. You may also choose to repay a lump sum if you can afford to, but these lumps sums are often controlled by a set of restrictions limiting the amount you can pay off at any one time. Interest rates on these loans are normally variable and they are only usually offered to applicants with clean credit records.
- Home Improvement Loan
After cars, home improvements are one of the most common reasons for people to take out a loan. Replacement windows, conservatories and loft extensions can be expensive projects and the loans people take out can be quite large. When considering a home improvement loan you should be clear on how much you need, when you want the loan to start, whether you need all the money at the same time, when you intend to repay the loan and whether you need the flexibility of making variable repayments. If you choose a very flexible loan you may be charged a slightly higher rate. If the loan amount is large, it may be wise to secure the loan against the equity in your property in order to get the amount you need at the lowest possible rate.
