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Secured Loans Are Based On Equity In Your Home
In financial jargon, the word Equity means the difference between the market value of your home and the debts raised against it. In other words, it is the unencumbered value of your home that is known as equity. The concept of equity is important for a homeowner since a loan can be raised against the equity in your home. Many lenders offer a loan to value ratio of eighty per cent only. It means that if your home has a value of £150,000, you can take a loan up to £120,000.
The credit rating that you have at the time of taking loan is very important. A good credit rating implies that your past conduct in the financial transactions was trustworthy and, therefore, lenders are likely to offer you a low rate of interest. By releasing the equity in your home, you can borrow up to £250,000. People usually take loan against equity only when they have large monetary requirements.
How borrowers are advantageously placed when taking secured loans?
In the past few years, the value of an average home in the UK has increased manifold. This reflects in the prevailing home prices; an average home costing more than £200,000 in the UK. The higher the price, the higher will be the equity in your home. Thus, the homeowners who want to borrow money are obviously better situated than those who are living on rent. In normal course, lenders give 80 per cent of equity in your home as a loan but this is not a fixed criterion and you may get more or less depending upon individual financial circumstances.
Bad credit loans and credit reference agencies
Secured loans are also available to those people who are having a bad credit rating. The credit rating is a numerical figure that is attributed to every borrower on the basis of his past conduct in the loan market. There are several credit reference agencies in the UK that gather information from various sources like the electoral roll, county court judgments and financial institutions. On the basis of the information collected, these agencies give a credit rating to every borrower. Lenders check credit rating to their satisfaction before sanctioning any loan to the borrowers.
Bad credit loans are available in two ways by providing a security or without it. However, lenders prefer to give bad credit loans only to those borrowers who can provide a security. This is usually done to cover the risk involved in giving loans to people who have dubious credit record.
Credit Bureau Basics
Credibility counts. And no one knows it better then the credit bureaus. These are the places where you can get a rating to certify your creditworthiness. And of course they charge you for it. The approach is simple enough. They keep an eye on the credit transaction that a person enters into and then its repayment. The banks and credit card companies use this information before striking a business with an individual. Credit bureaus are not watchdogs. They are just observers who want to know if a borrower is respecting the borrowed monies. They have to keep a track of how borrowed money is used. Trans Union, Equifax etc. are some of USAs credit bureaus. They are governed under an act and also under a mandate to revive a persons reputation if he can get a hiatus of at least seven years after one bad credit. But if one goes bankrupt then the time for him to prove his creditworthiness is an extra three years.
The average American lives under some kind of debt all the time. The number of bills that flows in through the letter-slit of every home at the beginning of every month shows this. The piling up of bills can leave any one dumbfound. A proper management of the bills has to be understood in order to clear them. The to-do-list approach is one such way to get tem off your shoulder. Pen them down in order of last day of payment. The bills for services that sustain a person have to be paid in priority. The gas, telephone bills are some such debts. Tax too finds itself on a higher podium then the others. No bill is les important however; some are more important then other. So the ones that are not, can be kept at a secondary priority. It varies from a person to person in deciding, which is which.
A monthly budget has always been a good tactic to handle overspending. At the beginning of the month expenditure list must be made. This works as a guideline throughout the month and also a corrective parameter. A budget is not a very complex document. The sources of income and expenditure have to be listed and then it has to be calculated which exceeds which and by how much?
Its always better to be in the good books of the credit bureaus. And for doing so it becomes important what the secret eyes are watching. A model proposed by Fair Isaac & Company is used to figure out the credit rating. It includes data about outstanding debts of a person, since when is the person running on credit, what types of credit dies he takes and what kinds of accounts thus he operate with. Apart from these there are many more but the rating program keeps these into top priority.
Many people do not have a clear picture of what a credit bureau does. A CB is never biased against the minorities, which is a big misconception that it is. These are absolutely secret services and they never disclose the information about a person about any other one. So now if you want to get your money credibility right, get in to the good lists of the credit raters.