What drawbacks should a borrower consider when looking at applying for a secured loan?
The time it takes to apply for a secured loan and receive a loan decision from a lender can represent a major drawback for some borrowers. It takes longer than going through the unsecured loan process, but is typically quicker than applying for a mortgage. There is also a longer consideration period for borrowers to consider the loan offer in full. Borrowers may also need to take legal and financial advice related to securing their loan against their home or another asset, while there may be additional upfront fees and costs to pay when going through the secured loan application process.
Aside from the application process, the other major drawback is that the loan is secured against a high value asset, which is usually the borrower’s home. This means that if payments are missed or the loan account defaults, the borrower’s home, or other asset, will be seized in order for the loan to be repaid.
While the process for getting a secured loan cannot be helped, the potential of a borrower losing their home can be avoided through careful financial management to ensure loan repayments are kept up to date.
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