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Secured Personal Loans- Equity Decides the Loan Amount

Author: Anaya Erika Author Ranking Silver | Posted: 17-04-2007 | Comments: 0 | Views: 28 | Rating:  (50) Article Popularity - Green (?) Got a Question? Ask.
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Ever seen a watermelon fruit? Well, simply put, it huge. Now, compare it to its source... the watermelon seed. It seems impossible to imagine that a tiny seed would grow into such a such a massive fruit. This phenomenon of getting big, fruity results out of tiny sources works parallel to the concept of secured loans. By giving a low interest on the installment every month, one can actually fund major projects. So, be it buying a new house of your dreams or funding your child's education, going for a makeover surgery or exploring an exotic holiday destination, getting yourself the latest car model in the market or expanding your business, secured personal loans gratify your every financial need.

Your home equity can actually get you hefty loans at low interest rates, in fact the lowest in the market as other loans such as the unsecured loans carry almost double the APR of secured personal loans. Secured loans have a long repayment period that can stretch from 5 to 25 years and may even go up to 30 years, subject to lender's credit policy.

A secured loan is basically calculated on the value of the equity in the borrower's house. Equity if the market value of the house minus all debts running against the house. Greater the equity, greater the loan eligibility for the borrower. Although most borrowers grant loans up to 90% of the equity, some also offer up to 125% in case the borrower suffers from negative or insufficient equity. In the later case, the lender may charge a higher APR in comparison to the normal cases because the risk involved for the lender increases in the case of negative or insufficient equity.

It's a rule that in case of default, the first mortgage is always paid before other loans. So, if a borrower has, per say, two mortgages running on his equity amounting to 50,000 and 25,000 and his home value is 100,000, the equity left for the third mortgage i.e. the third secured loan is 25,000. However, if the lender grants him a loan valuing 50,000, he runs at a high risk. 50% of what the lender has granted is not secured by any equity and thus, he'll charge a comparatively high rate of interest than charged on the first and second secured loans.

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About the Author:

The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. She is currently assisting loans-park as a finance specialist and elaborating on secured loans . For more information please visit at http://www.loans-park.co.uk/

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Frequently Asked Questions

Car Loan - sending additional $$ to pay off faster
By: nybaby40 | 10-08-2008
Hi Lita, I have always heard of people sending extra money with their car payments to reduce the loan and I did for the first time only to notice that 100% of the amount I sent was applied to the interest and nothing went to the principal...what is then the advantage?  Shouldn't that payment have been applied to the principal????? Thanks

I want to buy a car title loan business in Reno ...
By: tlthomas | 22-01-2008
I want to buy a car title loan business in Reno/ Carson City- I need a business broker to find one for me- Trina Thomas 4024777003

If i have bad credit and need a loan for five ...
By: bigraj19 | 08-12-2007
if i have bad credit and need a loan for five hundred can i get the loan and i have no income coming in at all

Can i apply for a payday loan even if im on ...
By: darren | 16-08-2007
can i apply for a payday loan even if im on benefits. if not is there anyone who will give me a loan even if i on benefits

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