Although it can be relatively easy to borrow small amounts of money – where ‘small’ means anything up to a few thousand pounds – there are circumstances in which you may need access to larger sums of credit. You may be consolidating existing debt, thinking of a once-in-a-lifetime holiday, making home improvements or needing to take a break from work. Because the level of risk to the lender is higher the more you need, there is a limit to what you can borrow without giving some proof of your ability to pay it back. Homeowner loans are one way of achieving this.

The loan is secured against your property, which has a number of advantages. Firstly, however, it is worth clarifying that, should you be unable to keep up repayments, you run the risk of your house being repossessed to pay your debt.  The lenders will take into account various other factors, such as your income and any previous bad debt, when they calculate how much you are likely to be able to repay and therefore how much to lend you, but the premise they work on is that their risk is insured by the knowledge they can sell your house if they need to. Of course, the chance of this happening will be relatively small, but it is an eventuality you must be prepared to accept, should it come to it.

Homeowner loans and interest rates
Having said this, there are a number of good reasons to opt for a homeowner loan. Firstly, it is one of the only ways to borrow large sums of money. Secondly, because the debt is secured, it is relatively safe for the lender, which means that they can afford to offer you far better rates than they would if the loan was unsecured. They are safe in the event of default and this is reflected in the price you pay. This might be especially relevant for someone with a poor credit history, who might otherwise find it difficult to borrow, or have to accept a far higher interest rate on an unsecured loan.

The terms can be highly flexible. Homeowner loans are frequently long-term debt, meaning that monthly payments are relatively low and can take place over many years – anything up to 25 or, in some instances, longer still. The amount you can borrow will depend on the value of the security (your house). If you own it outright this will be more than if you have a large mortgage, as the lender will, of course, only profit from the equity that is actually yours, rather than the proportion of the house that effectively still belongs to the mortgage company.

The amount you will be able to borrow, and the interest rate at which you make repayments, will vary from lender to lender, so shop around. The internet is a great place to get a feel for what’s out there and an idea of what the best deal at any given time is.