Secured Loans

Secured loans indicate liabilities accepted by Individual/Company which are for the purpose of purchasing the fixed assets and are repayble over a period of 5-25 yrs. The term loan may be granted by bank or financial institutions etc.

Banks or financial lenders who provides or grants secured loans are not at all the owners of the company or the property which you will purchase with this loan amount. They are creditors of individual or company. They lend the funds to individual or company.

Secured Loan Terms

In financiall terms, a Secured loan can also be defined as a second charge mortgage, and is generally available if you are a homeowner or you are equity holder in some property or, less usually, where there is some other valuable asset involved. The lender has a right to recapture the asset and to sell it out for getting their money back if you don't make the repayments as per the terms of agreement. So, if at any given point of time, you as the borrower of the amount are found unable or don't make the timely repyament, the Lender may reprocess your Home or the Property against which you get yourself a Loan. Secured loans are required to be repaid during the life time of the company at the predecided intervals say monthl, quaterly, yearly etc. The intital gap after which the repayment of loan starts (techniqually referred to as the morotorium period) also depends upon the agreement between the borrowing company/Individual and the lending bank or financial institution.

Loan can be termed as Secured or unsecured, though normally all the term loans are secured. The security which is offered for the secured loan is the hypothecation or mortgage of the fixed assets purchased with the help of secured loans.

Return payable by the individual or the company on secured loans is in the forms of interest which may be calculated on monthly or quaterly or half yearly basis at a predicided rate on the outstanding balance of the secured loan. The interest on any purpose loan is payable despite the non avaialability of profits.

Loans as a source of raising long term funds is very risky from companys point of view. The risk accepted by the company in case of secured loans is twofold. One, to pay the interest at predecided rate and at predecided time intervals which was fixed at the time of taking a secured loan from bank irrespective of non-availability of profits and second, to prepay the principal amount of loans.

Risk on the part of lending bank or financial institution in Uk is very less in case of secured loans. the bank or financial institution being the creditors of the company, they cannot control the affairs of company. As Such they do not have any voting rights. However in case of non payment of loan or interest they can interfere in the operations of the company or can take a legal action against a Individual or a company.

In financial terms, as in case of debentures, Secured loans also prove to be a cheap source of funds from the company's point of view.

Homeowner Loans

Homeowner loan is a contract between the borrowing individual and the lending bank or financial institution. This contract is written contract reffered to as "term loan agreement". The term loan agreement stipulates the various terms and conditions on which the relationship between the borrower and the bank is regulated.

Home equity loan agreement has various clauses

1. Amount of loan
2. Period of repayment
3. rate of interest payable
4. method of payment of interest
5. nature of security offered

In addition to the general security offered for the home loan, the agreement may provide for certain additional covenants in order to protect the interests of the lender. These covenants may take various forms, some of which are stated below:

T& C for Secured Homeowner Loan

1. Borrower will submit the copy of anual accounts to the lender, soon after they are finalised.
2. Asset/ home purchased with the help of home loan will be properly maintained and issured by the borrower or borrowing company.
3. That the homeowner/lender may have a representive on the board of directors of the company (viz. Nominee director) if the loan amount is sizeable.
4. The bank or the lender will like to ensure that the homeowner or the company who is borrowing the home loan/secured loan has the liquid resources in its hands whenever the interest or the installments of the home loans are due. As such the bank or the lender will like to confirm that the liquid resources of the company are not blocked for unnecessary purposes. hence the agreement may stipulate that-
a. Borrower will not pay dividend without the consent of the lender.
b. Borrower will not make long term loans to Directors/officers/friends/family members.
c. Borrower will not invest in outside corporate securities
d. Borrower will not redeem the debt before maturity.