Secured Loans ‘Increasingly Competitive’
The secured loan market is currently seeing deals that match the competitive rates of unsecured loans thanks to a recent surge in demand. MoneyExpert has seen a sharp rise in the demand for secured loans in the last six months. In particular, the comparison website has highlighted a staggering 85 per cent increase in homeowner applications in the quarter ending January 2008 compared to the quarter ending October 2007.
Now new research from the website finds that borrowers can obtain a secured loan of 15,000 pounds against their property and receive interest rates as low as 5.9 per cent, compared to an average APR of 8.44 per cent for an unsecured loan of the same amount. MoneyExpert highlights that even the most competitive unsecured loan deals perform only slightly better than the best secured loans.
Sean Gardner, chief executive of MoneyExpert, illustrated that traditionally secured personal loans were chosen by consumers as a “product of last resort”. However with the recent rush in demand, institutions are now offering more competitive interest rates in a bid to attract the buoyant consumer market.
“The best secured loan deals are actually cheaper than the average unsecured loan,” he stated. “That coupled with the fact that one in three of us are worried about our ability to handle our debts means it’s an option that more and more people are now turning to.”
Mr Gardner went on to acknowledge that the client base for personal secured loans was still largely constituted by those who found it difficult to obtain an unsecured loan. But, he stressed that it did not make secured loans “inherently bad” as such homeowner loans can act as a “lifeline” for an applicant with a poor credit record who is wishing to consolidate debts.
The MoneyExpert chief went on to warn potential applicants of lender or broker fees, indicating that some headline interest rates may not include fees which often do not apply to an unsecured loan. However, he stressed that even with a fee the competitive rates on personal loans “make them worthy of serious consideration”.
Detailing the best deals currently on offer, the website confirms that the cheapest unsecured loan for under 1,000 pounds is available through Zopa with rates of 5.54 per cent. The best offer for unsecured loans of over 5,000 pounds comes from Lloyds TSB at an unsecured rate of 6.64 per cent - though it is only available to existing customers.
The new year has not just seen a rise in demand for secured loans, with MoneyExtra noting that January saw a sharp jump in average outstanding credit card balances as consumers’ saw their festive spending catch up with them. Average credit card balances for January 2008 rose to 2,168 pounds in one month - a 17 per cent increase.
However, the personal finance website highlighted that the average credit card balance is down on the past few Januarys. In particular, this year’s figure is down by 36 per cent on the average outstanding balance in January 2005 of 3,411 pounds.
Secured loans can be of use to homeowners in the UK for any number of tasks, from renovating a property to investing in a new car. They could also be used to fund the improvement of the property’s own security. Recently, David Rochester of Halifax Home Insurance stated that wintertime presents an ideal opportunity to invest in improved security around the home. This was especially the case given that the longer nights over the winter are met with a higher incidence of burglary.
Essentially UK Home Loans bringing you breaking secured loans news.