The word 'Equity' has different meanings and connotations, but when used in connection with loans, it means the unencumbered value of your home. Usually, people take loans against the value of their homes. If someone applies for a loan for the second or third time then the value of his home available for loan purpose would get decreased by the amount of loan already taken on it. The value which is available for loan purpose is called Equity.
The concept of Equity has significance in case of loans taken against property. A loan can be raised in many ways like overdraft, loan against securities, shares and stocks, etc. However, lenders are more interested in giving you loans against equity in your home. This is considered to be the best and safest way to lend as far lenders are concerned. They can even lend a large amount of money, say up to 250,000 pounds.
The loan-to-value ratio in most of the secured loan cases remains around 70-85%. In some case lenders also offer 100% LTV, out of which 80 per cent is secured loan and other 20 percent is generally unsecured. However, these loan offers have been discarded by most of the lenders after the worsening credit situation in the UK financial markets. Another important aspect that is taken into account while offering secured loans is your credit rating. A good credit rating denotes that the borrower is having a good past conduct in the financial matters. Such a person can be trustfully handed over a loan.
Are secured loans always advantageous for the borrowers? Yes, it is a reality. The conditions attached to these loans are so much favourable to the borrowers that none other loan can match it. As far as loan eligibility is concerned, it is highest in case of these loans. The past few years have recorded a significant increase in the home prices in the UK. This reflects in the current home prices that on an average hovers around 200,000. Even if a lender offers 80% LTV, the loan eligibility will come to a whopping 150,000 pounds, and that too, at very competitive rates.
A borrower should compare secured loans available in the market before taking any final decision. It is always in the best interest of the borrowers to do research and take any loan with due care and consideration.
About The Author: The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in Business Administration and is currently assisting ask4loan.co.uk as a finance specialist.
For more information related to personal loans: http://www.ask4loan.co.uk
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