Borrowing money from lenders has been people’s method of financing certain things for a long time now. Finding oneself in a financially tricky situation and not having the money to get out of it is certainly a time when you will turn to lenders. Apart from that, people also borrow money when they want to make certain purchases, such as finally buying a vehicle for example, or when they want to do some home renovations, event organizing or something similar.
In any case, there are undeniably a lot of reasons why people take out loans. But, there are also various different types of loans that you can take out when you decide to borrow money from lenders. And, you have to get familiar with those different types, so that you can get a clear idea about which one works for you perfectly. Sure, the distinction between personal loans and mortgages is already perfectly clear to everyone, but what I am talking about here is the idea that there are different types that fall into the category of personal borrowing.
Anyway, before we get to talking about one of these specific types, let us first make it clear what the concept of personal loans entails to begin with. In few words, this is a borrowing solution that allows you to get the money you need and spend it on basically anything you want, without having to worry about any kinds of restrictions. You are not limited when it comes to what you can spend your money on, which is different when compared to the idea of taking out a mortgage, for example. I am sure, though, that you already understand this.
Now, as I’ve mentioned already, there are a few different types of personal loans that you should take into account when trying to make sure which one is right for you. Today, we are going to be discussing one of those types – a rather common and popular one, known as the secured loan. The goal is to help you understand what it is, as well as what it means to take out a loan with security in housing, after which we will proceed towards discussing the idea of whether you should get it, and of how you can find and get a good solution, should you choose to do so.
What Is a Secured Loan?
Before we can discuss the concept of a lån med sikkerhet I bolig, we first have to ensure that you understand the more basic concept here. In other words, we need to make it clear what secured loans are, as that will make the part of understanding these specific ones much easier. So, without any more ado, let us find out what secured borrowing actually is.
You may have heard already of the secured, as opposed to the unsecured, loan. To understand the one, you also have to understand the other. Let us, therefore, explain the unsecured option first, and then proceed towards shedding light on the secured one. Although, I believe that understanding one option will lead to clearly comprehending the other as well. Anyway, let me provide you with the explanations.
Basically, unsecured borrowing is the idea of getting money from lenders without them requiring any kind of collateral from you. Collateral is an asset that borrowers provide to the lenders, and it serves as security that the loan will be repaid on time. If then, the borrower defaults on the loan, the lender has the right to seize that asset from him or her. Well, this is something you won’t have to worry about with the unsecured solution.
On the other hand, the secured borrowing option is the one that definitely requires collateral. In other words, it is a loan that the lender will provide you while requiring some of your assets, most likely a property you own, to serve as collateral. As you can see, this is the less risky option for the lenders, although it may be a bit riskier for the borrowers. That is why you should never take out this type of a loan if you are not sure that you can afford the monthly installments and that you can repay all the money you have borrowed.
There is one more thing you should know about this solution. Given that it is less risky, it comes with one specific advantage. The unsecured borrowing option usually comes with higher interest rates, and that is completely normal and to be expected from lenders that assume higher risks when providing people with money. So, as you can conclude logically all on your own, the secured option, since it involves collateral, is less expensive. Put differently, the interest rates offered are lower, which makes the entire loan cheaper.
What Is a Loan With Security in Housing?
Now that you understand what secured borrowing is, the next thing you want to know is what exactly a loan with security in housing is. This, however, should be perfectly clear after the above explanations. To make it even clearer, though, this is the option of getting a secured loan and offering your home as collateral. It is one of the most common secured loan solutions that people get.
Of course, the amount you will be able to borrow this way depends on the equity you have in that property. And, equity is essentially the difference between the property’s current market value and the outstanding mortgage balance. Furthermore, you are not allowed to borrow more than 85% of the actual value of the home. Yet, you can’t be sure how much you will be able to borrow until you do a home valuation.
If you have done the valuation a few years ago, you may be thinking that you have all the numbers right there already, and that you know exactly how much you can borrow. But, this is not true, not only because you’ve been repaying the mortgage during those years, but also because the value of property changes on the market, due to various reasons. Furthermore, when you go to forbrukslån.no/lån-med-sikkerhet-i-bolig or a similar useful source, you’ll also realize that the renovations you may have done on your property can also play a role in its value. So, if you’ve renovated it recently, the value may have gone up and you may be eligible for a higher amount.
Should You Get It?
Wondering whether you should even consider getting this type of a loan? I know that the idea of borrowing against the equity of your home may sound a bit risky, but here is the thing. When you calculate everything correctly and when you are sure that you can easily pay the monthly installments, the risks are quite low. It is not without a reason that this is one of the most popular borrowing options. Apart from being able to borrow larger amounts of money this way, the option comes with quite a few other important advantages.
First off, the interest rates are low, because the lender carries lower risks due to the fact that there is collateral involved. Then, the funds you can get this way can be used for various different purposes, meaning you’re not limited as to how you can spend the money. And then, in some cases, the interest you’ll pay on this type of a loan can be tax deductible.
How to Get a Good One?
If you’ve taken the time to think about it, and if you’ve decided to go for this option, then the next thing you want to do is figure out how to get a good one. And, in order to get a good lån med sikkerhet I bolig, what you should do is take time to find the right lender first. Research several different ones, aiming at determining their reputation and at checking the actual terms they are offering, such as interest rates, repayment terms, as well as any fees associated with the lending process.
Once you’ve chosen a lender, you’ll simply have to gather the necessary documentation and apply for this solution. After that, your property will be appraised, so that its current market value is determined. Furthermore, your creditworthiness will be checked as well, because the lender has to determine if you’re capable of repaying the money. When all of that is done, you will be approved for the loan.