A Homeowner loan is a loan which is meant solely for a homeowner. There are two types of homeowner loans – a secured loan and an unsecured loan.

A secured loan is basically a type of loan that requires the borrower to provide a form of security to the lender. In the case of a secured homeowner loan the security is the borrower's property. Secured homeowner loans are available in varying amounts and can be used for different purposes. The loan amount is usually between £3,000 and £50,000 but some lenders may lend up to £100,000. Repayments are made monthly and over a period that is agreed at the start which can range from 3 years to 25 years. A penalty could be charged for pre-paying the loan so the borrower should check the lender's policy prior to obtaining the loan.

Home equity is a key thing that separates secured homeowner loans from standard personal loans. It is based on the equity that a homeowner has in their house or real estate. Equity is the portion of borrower’s home that they actually own. If the borrower pays off more of their mortgage, then the home equity increases. So, the more equity the borrower has, the more money they have invested in the house and therefore the more of it can be converted into a secured homeowner loan. Home equity becomes the collateral for the loan and hence larger amounts of equity usually translate into larger maximum loan amount available to the borrower.

The interest rate charged by the lenders is referred to as the Annual Percentage Rate (APR). The APR quoted by the lender acts as a guide to find the exact rate offered on an individual basis. Borrowers in their own interest should compare the APRs of different loans, as this is a good way to determine how competitive they are.

The amount a borrower can borrow depends on the term available and the APR depends upon the equity that the borrower has in the property, the lender's view of the borrower’s ability to repay the loan and other personal circumstances like adverse credit history. A borrower may be able to borrow up to 125% of the property value if the lender finds the other conditions satisfying.

Other advantages to obtaining a secured homeowner loan are that since it is a secured loan it is much easier to obtain than unsecured loans. The reason is that the lender has the added benefit of security, which provides protection in the event of a customer's inability to repay. It is very helpful for the self-employed, people with an adverse credit history etc. to take a loan. They are very useful when the borrower wants to take a loan of a large amount.

A secured home owner loan is subject to The Consumer Credit Act 1974. The Act contains regulations about how money should be lent and covers loans up to £25,000. Loans for sums more than £25,000 are not regulated. Lenders offer insurance policies and payment protection schemes to cover the borrower’s monthly repayments in the event of an accident, sickness, unemployment and death. Both the cover as well as the cost varies from one lender to another so the borrower should check the loan terms and conditions.

With a secured homeowner loan, a form of collateral is needed against the loan. However with an unsecured homeowner loan, it is not needed. Because of this, the loan lender will not ask the borrower to provide their house as a form of security in order to obtain the loan. However, before granting a borrower with an unsecured homeowner loan, the lender will have to verify the borrowers’ credit history. He may do this by using one of the main credit rating agencies. This will also enable them to look at your repayment history, for example if you have made the monthly repayments of previous debts on time.

However, there are a great number of benefits which are included within an unsecured homeowner loan. These loans are not only expelled from the risk of repossession of your collateral, the approval procedure of these loans is considerably faster. An unsecured homeowner loan can be used for a number of different reasons such as, Home improvements, Consolidation of debts and Education. An unsecured homeowner loan also has an advantage of being offered an easy repayment option as well as a flexible repayment period which would range between 5-10 years.

Homeowners have a distinct advantage when applying for loans. Even if you have a bad credit rating you should be able to get a homeowner loan for such things as home improvements, a new car, wedding, dream holiday or maybe just some extra money. Given that you own your own home the repayment rates will be low.

Home owner loans can normally be paid off over a long term if you so desire, this will help to reduce payments even more and should your finances improve you will be allowed to make overpayments to clear the loan more quickly.

The homeowner loan is secured against your home, which is used as security to the lender for the money you have borrowed. The loan is based upon the equity available in your property, while retaining your original mortgage and attracts a better, lower interest rate compared to unsecured loans. These loans also tend to be easier, more flexible and quicker to process without requiring an upfront survey and without legal fees having to be incurred. To compare further still some excellent loan rates visit Loans UK.