Home loans can give access to credit for people who have a damaged credit history or cannot get a personal loan from a bank for other reasons, but who own their own home. A home loan works on the basis that your home is used as collateral against the money borrowed – which is why these loans are often known as secure loan, because the money is secured against your home.
Choosing a home loan is a big decision because if you fail to make the necessary repayments, you could put your house at risk. Use our free home loan calculator to help you find the best home loan deals and make sure that you find the best loan deals:
Benefits of a home loan
A home loan can offer advantages such as:
- Higher chance of acceptance – you are more likely to be accepted for a home loan than for than a personal loan
- Lower interest rates – Personal loans for people with poor credit may charge a higher rate of interest than home loans
- Longer repayment term – this may mean that your monthly payment is smaller
- Borrow more – you can often borrow a larger amount of money with a home loan (as opposed to a personal loan)
Drawbacks of a home loan
Before you take out a home loan you need to make sure that it is the right decision for you and be aware of any potential drawbacks, such as:
- Risk to your home – if you fail to make repayments on your loan, you could ultimately face losing your home.
- Higher repayments overall – although you may repay a lower sum each month, you could find that you end up paying more on the loan overall as the longer the repayment term, the more interest you will have to repay.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. If you are at all unsure of the suitability of a particular product for your circumstances you should seek independent financial advice.