A cash secured loan in the UK (or certificate of deposit - CD) means you are placing a security against a loan amount. The loan amount is secured against a post dated cheque which states the amount and fees charged.
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Basic Information for a Cash Loan
Requirements for a cash secured loan include :
- You must be a resident of the UK
- You must be 18 years of age or older
- You must have an active bank account
- You must be employed and have a steady income (pay slips and bank account information must be provided as proof).
- You must take out secured cash loans only at the bank where you hold the account.
These requirements are in place to protect to protect the lender. In case in case of default, the lender will cash the cheque for repayment of the loan.
Short Term Cash Loans
Cash loans normally have a short repayment term. The amount you will be allowed to borrow in a secured cash loan will depend on the amount of cash you have in your bank account and your credit history. In general, CD loans are priced 2% to 3% over the rate that you are earning on your CD and fees charged for the loan. Repayment options may vary, if you want to receive the full value of your CD at the end of the term, its best to arrange to pay back the principal and interest amount during the loan term.
Approval of Cash Loans
With the security pledged, the loan can be approved easily. You will be offered a lower interest rate which means your monthly payments will be lower and you can save a lot of money. The money that was secured against the loan, even though it is fixed, will still be earning interest. Also, the cheque cannot be cashed without the bank's knowledge so this makes it the perfect collateral. Lenders normally grant 90 - 100% of the value of the deposit and the loan term will be no longer than the date agreed upon. This loan term may be renewed.
Poor Credit History
A cash secured loan can be a good source of funds if you have a poor credit history because you will not be offered a better rate by the bank, unlike the higher interest rates offered for other secured loans. This is a good way to improve your credit rating. CD secured loans are normally acquired for unbudgeted expenses such as medical bills, car repairs or broken windows.
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