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Homeowners Look to Home Improvements as Market Slows

Getting a loan from a bank is often tricky, especially if you are in need of a large sum of money or have a bad credit history. Taking out a secured loan is often an easier and safer way to obtain such a sum, with the loan being secured by a high value asset such as a property.

Consistent interest rate rises since August 2006 have made it a testing time for many homeowners, and for others who have unsecured debts, as the cost of borrowing has risen. Sharp rises in the US have led to a sub prime mortgage crisis, with many borrowers defaulting because of their inability to make repayments.

Whilst the problems have not been nearly as prevalent within the UK during the past year, the 1% rise in interest rates could mean a £60-70 increase in repayments on a £100,000 mortgage. Larger debts, especially from unsecured loans, have pushed a growing number of homeowners to refinance their properties in order to keep up repayments, and to consolidate their debt into one manageable monthly payment. ASDA Finance has said that 60% of its customers are using their homeowner loans in order to consolidate their unsecured debts.

Another worry for homeowners is widely circulating belief that house prices are set to drop in 2008. Whilst we are unlikely to see a dip as dramatic as the one seen recently in America, many consumers are deciding against upselling and are instead looking towards making home improvements. These improvements, such as extending your property or redecorating it, can often be expensive. Taking a secured loan out for these purposes is often the best way to obtain the necessary capital relatively quickly.

The maximum amounts available differ from company to company, but they are often £5,000 - £100,000. Due to their large size secured loans can also be paid over very long periods of time, meaning that you will probably not have to pay huge amounts monthly. Many financial institutions offer terms of up to twenty five years.

Here is a quick comparison table for some of the secured loans available in the UK:


Loan Type

Typical Rate

Maximum Term

Alliance and Leicester

Homeowner Loans

Typical 7.9%

25 years

Asda Finance

Homeowner Loans

Typical 8.9%

25 years

Ocean Finance

Homeowner Loans

Typical 13.8%

25 years

(Rates and term lengths correct at the time of writing 04/11/07)

If you would like to find out more about Secured loans, see a larger comparison table available from Motley Fool.

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