Owning a home which fits one’s satisfaction and choice is a lifetime dream of every individual. One needs a place called his sweet home where he can relax after a long tiring day, spend some precious moments of his life with his family members, feel comfort and security all time. But the booming prices of the property leaves people helpless with no choice except living with their unfulfilled dream occupying a soft corner in their heart forever. Home loans can help such people with all their financial crisis and help them owning their sweet home.
Home loans can be secured home loans and unsecured home loans.
In secured home loans, the collateral acts as a security against the loan amount. The borrowers can withdraw a loan amount in correspondence to the value of their collateral. These loans have a repayment duration of about 10 to 25 years. Such a long period of repayment makes the repayment easier and affordable without disturbing the economic life of anyone. Since these loans provide collateral in the form of a real estate, building, property etc. as a security against the borrowed loan amount, thus the lender also comes up with better terms and conditions as he do not have any kind of risk in this loan. He can recover the lended money anytime if the borrower fails to repay the loan amount. Moreover, the collateral benefits him with a lower rate of interest. Since the home of the borrower is kept as the collateral, thus the lender holds the ownership rights of the home only if the borrower fails to repay the entire amount of loan. The borrower owns the right of selling the home put as collateral with the permission of the lender. However, he has to repay the entire loan amount with the amount received on the sale of that home. Alternatively, the loan amount will be attached to the new home purchased. But, if the borrower fails to repay the home loan amount then, the lender can repossess that home to recover his money lended.
In contrary, unsecured home loans are free from collateral placement. The borrowers who do not own a valuable asset to avail the required amount of loan can go for the unsecured home loans. These loans can be availed in a lesser period of time since the evaluation of the collateral is skipped-off. Moreover, the borrower need not worry about the repossession of his asset in case of non-repayment of loan amount. On critical analyzation of the situation, it can easily be understood that in these loans, the lender is at great risk if the borrower fails to repay the loan amount. Therefore, to keep himself safe, the lender charges high interest rate on the loan amount so that he can enjoy higher profit. This loan is availed on the basis of the present salary and the repaying ability of the borrower.
Also, the borrowers with a bad credit can avail the home loans since now the lenders do not hesitate in allocating funds to bad credit holders due to the increasing competition in the market day-by-day. Thus, home mortgage is a dream come true for those with bad credit histories, those who find it difficult getting a loan sanctioned from the local bank or those forced into selling their home in a financial crisis. Many-a-times, the borrower takes wrong decisions regarding amount of loan, interest rate, loan provider and loan repayment because he doesn’t have any knowledge about all these issues. But, for his well, he should firstly collect all information regarding above said concerned issues and then take the appropriate decision.
Keith Kelly is author of Secured Unsecured Loans Australia.For more inform