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Can You Still Move If You Have A Secured Loan

by Jim ONeil on June 6, 2011

in personal loans

Secured financing is used by some homeowners who are not fully aware of the ramifications. Circumstances may result in a homeowner wanting or needing to change residences. Whether their secured loan is with a same or different institution as their mortgage, people may wonder if they can move before this loan is repaid.

Though debt seems to be a universal tool for personal financing, not all is equal. A secured loan can be used to pay for the same things as the unsecured version, such as a holiday or vehicle.

However, it is secured by a major asset of the borrower. In many cases, this asset is the home. Every day, residents of the UK put their houses on the line to obtain secured loans.

These are not cheap loans. Interest rates are usually higher than financing provided by high street lenders. Penalties for defaulting tend to be more severe because people taking secured loans are usually a higher credit risk.

This sounds like it would work against people wanting to free themselves of such debt but there is hope.

The homeowner may make enough profit from the home sale to pay the secured loan and place a decent deposit on a new house. If this will not work, the individual can ask to transfer the secured loan to the new home.

Not every lender will agree to this and if it does, a fee may be charged.

The final option, which is the most unappealing, is to pay off the secured loan using an unsecured personal loan. The individual should compare monthly costs, taking into account early settlement fees for the new loan.

When the new mortgage application is submitted, this new loan will be considered during the approval decision, which may result in a higher mortgage interest rate.

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