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Can you take out a secured loan if you don’t own a home?
Secured loans are, as the name suggests, secured against an asset and in most cases the asset is your property. So in the vast majority of cases you’ll only be able to take out a secured loan if you own a home.
This is because your property is a stable asset that lenders will be able to rely upon should the worst happen and you fall behind on your repayments.
Using your home as security
When you take out a secured loan, your home is used as security – which is why it’s often called a “homeowner loan” too. This means that, should you fall behind on your repayments or fail to repay, your lender can take possession of your home, sell it and use the money to pay off what you owe.
That’s why it is very important that you are certain you’ll be able to afford the repayments on a homeowner loan before you take one out.
Can I secure a loan on a different asset?
In some circumstances it is possible to secure a loan against an asset other than a home. For example, logbook loans are loans that are secured against your car. Here, your car works in the same way that your home would, in that should you fail to repay on time, the lender can legally repossess your car.
However, it’s important to note that the logbook loans market has attracted some criticism for bad practice. There have been reports of cases where cars with outstanding logbook loans have been sold to customers who are unaware of the debt who have then had their car repossessed.
Consider a personal loan instead
If you’re in a situation where you need to apply for a loan, but you don’t own your own home, you might wish to consider a personal loan instead. For example, if you’ve recently got a new job that requires you to drive and you need to buy a car then a personal loan might be an option to help you to pay for one.
Where secured loans often have terms of up to 30 years, personal loans typically only last between two and five years. Ocean offers personal loans between £2,000 and £5,000 at 44.9% APR representative that can be used for a variety of purposes. If you have any questions, please don’t hesitate to get in touch with us via our Facebook or Twitter.