Secured Finance Can Be A Great Investment

With the ability to get rates as low as 4 or 5 per cent, many borrowers are turning to secured finance for the credit or investment needs. Many people believe that secured loans are only for mortgages and car loans. However, many Brits are turning to secured products in order to pay down higher rate debt, fund home improvements or projects, and even invest in their own businesses. Home equity loans or other secured personal loans are growing in interest as annual percentage rates (APR) continue to fall, with Bank of England base rate cuts. Secured finance is simply debt acquired by offering the creditor property as collateral in order to guarantee the loan, get a better rate offer, or improve terms. Many people rely on secured loans for various reasons. Some people secure their loans out of necessity. Lenders require bad credit borrowers to secure loans, at times, because of the risk associated with their credit behavior. Other borrowers just want to get the best available rates, or the highest available loan amount, and offer property as collateral to put the lender at ease. With great rates available to excellent credit borrowers in today’s lending market, many people are looking to secured finance as a funding source for home improvements, projects or vacations, or as an investment source to fund a business. There is, of course, some risk involved with securing a loan. The reason lenders appreciate the secured cover is that they have leverage in the event of non-repayment by the debtor. If someone does not pay their debt, the creditor could potentially repossess the secured property. This not only protects the lender, but often motivates borrowers to only take out loans they can repay. Because of low rates, many consumers are using secured homeowner loans or personal loans to consolidate higher interest credit card debt, or unsecured debt. With national credit card debt increasing, it seems logical that debtors would be trying to find better rates. Getting a great rate on secured financing can mean the difference between a new business starting, or not, or a current business expanding, or not. Getting great rates through secured loans can help businesses retain necessary profit that helps make their business successful and able to meet ongoing expenses. As with any loan products, consumers need to take their time to find the best loan product to meet their needs. Rates and terms vary from one lender to the next and products can be confusing to sort through. This is why many consumers turn to loan brokers to find the right products and terms. Loan brokers are independent liaisons who help match customers with the right products and rates. Independent brokers typically maintain relationships with hundreds of lenders and have access to a large number of loan products and rate offers. By consulting with consumers through online forms, or through other contact points, brokers can discover consumers’ specific needs. They can then use their knowledge of the secured finance market to find the best options available at the lowest rates.

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How To Finance An Investment Property

The secret in real estate business is to use other people’s money. This is how most real estate tycoons are made. Unlike traditional residential real estate mortgages, real estate financing offers much broader financial options, including lending or financing from various financial institutions. Transactions like these call for above-average negotiation skills. It’s not advisable to invest your own money in a real estate as for a few very important reasons. First, you you tend to give most of your profits away by not leveraging your investment. Second, real estate is a very risky business – you don’t want to jeopardize everything you have. This is not to say that real estate investment is all about losses. On the contrary. if you know how to make money work for you, you may actually garner a great deal of money in return for your investment. Here’s how: If, for example, you purchase a $100,000 property that increases an average of 7 percent per year (in reality that number could be higher or lower), you would see a net profit from renting your property resulting in an approximately 15 percent return. If you’re content with little return of investment, you might settle with your 15 percent return. But if you really want to earn on your investment, consider the possibility of what leveraging can do for you. At present, a typical real estate investor can find financing as high as 95 to 97 percent of the purchase price. There even some instances where you may be able to get a 100 percent financing but we won’t use this for our example as it’s an inadequate comparison. So, if you’re are an investor who is already content with a smallreturn of investment then 15 percent sounds like a lot. But for those who really want to make it big in the real estate, 15 percent is far from being considered a noteworthy return. How does leveraging work? Let’s assume that the rental income will cover all your expenses, including the mortgage payments. Taking the same example, a 7 percent appreciation of your property results in a $7,000 profit per year. With a 95% financing in place, you’ll be able to get a $7,000 return on $5,000 (your 5 percent down payment on a $100,000 real estate property). This will provide you with a 140 percent return on your investment. Not only that, with the same $100,000 you can go out and purchase 20 investment properties, finance 95% percent of them, and make an amazing $140,000 profit a year. This totally beats the $15,000 profit with an all-cash transaction. In terms of the additional 20 properties, expect to have a hard time getting financing for them since usually only five or six new rental property mortgages are the maximum that lenders presently allow. Which is why you need to have an above-average negotiation skills.