What is a homeowner loan?

Loans come in so many shapes and sizes - variable, fixed, with fees, without fees, homeowner loans, insurance - it can seem quite confusing.

So where do homeowner loans fit in? Why are they better than bank loans? How does a homeowner loan compare to credit cards?

Put simply, a homeowner loan uses your house as security. This means there's less risk for lenders, so they are willing to lend you more money at a lower rate.

Homeowner loans can be attractive if your credit history has been knocked by missed payments, CCJs or arrears; or if your bank won't help.

With a homeowner loan, your home is at risk of being repossessed if you don't keep up with repayments. However, with a bit of common sense, you can make a homeowner loan work for you.

Use a homeowner loan to get rid of credit cards

For example, many people who apply for homeowner loans say that before they applied, they found themselves with numerous credit cards and store cards. Those seemingly small repayments just kept adding up - every month - accruing interest.

They found themselves getting nowhere.

With a homeowner loan, you can arrange a lump sum to clear all your smaller debts. You can even specify how much you can afford to pay out each month.

This means you can keep more of what you earn, and it allows you to keep track of your outgoings.

Because let's face it, anyone would find one bill easier to pay than seven bills from different creditors.

So how much can you borrow with a homeowner loan?

You can usually borrow from £5,000 to £100,000, over five to 25 years, with a homeowner loan. What you borrow depends on your home's value and your ability to repay the homeowner loan.

Homeowner loans can be an excellent option - if you keep up with your repayments. You'll enjoy peace of mind knowing how much you're paying out each month, how much interest you're being charged - and how much you'll pay back in total.