What is a Consumer Secured Loan?
A consumer secured loan is a form of credit that can assist you in making a large purchase or by consolidating high-interest debts. Additionally, they can have a variety of purposes, such as paying medical expenses, supplying funds toward your home’s construction or renovations, or purchasing major household appliances and vehicles.
When you apply for a personal loan through Bank of Old Monroe, you’re asking to borrow a specific amount of money that will be repaid over time through fixed installments. Generally, collateral will need to be provided for a consumer loan. If you select a fixed rate loan, you will pay the same amount each month until the debt is completely repaid. Before applying, it’s crucial to understand the basics of consumer loans. Common loan terms to know include:
- Principal. This is the amount you borrow. For instance, if you apply for a personal loan of $5,000, that amount is your principal. As you continue to pay your monthly installments (payments), the principal decreases.
- Interest. When you apply for a consumer loan, you agree to repay your debt plus interest which is basically a charge for borrowing the money. Expressed as a percentage rate, we calculate your interest based on the outstanding principal amount. The interest is included in each monthly payment.
- APR. Standing for “annual percentage rate,” APR incorporates the interest owed as well as other fees to provide a better visualization of your loan’s costs.
- Term. Defined as the number of months you have to repay the loan, the term provides a timeline for your payments.
- Monthly payment. Every month, you will pay a portion of the principal, as well as the interest, during the life of the loan. Each monthly payment (also called installment) will remain the same.
Types of Consumer Loans
At Bank of Old Monroe, we offer various types of consumer loans suited to your individual needs. Whether you’re looking to consolidate your existing debt, pay for the construction of your new home, or fund the purchase of a UTV, we have you covered. Below are the types of personal loans we provide:
Home Equity Line of Credit (HELOC)
A home equity line of credit, or HELOC, is a type of consumer loan that allows you to draw funds based on the amount of equity you possess in your home. Your home’s equity is the difference between what you still owe on your mortgage and your home’s value. For example, if you still owe $100,000, but your home is worth $150,000, your equity would equate to $50,000.
Home equity lines of credit allow you to withdraw funds during a specified timeframe, called the draw period. During this time, you may use the money to invest in home improvement projects or to pay down existing debts. The only money you owe throughout the draw period is the interest on the funds you’ve used. It’s important to note that HELOCs require your home as collateral, meaning that you should stay on top of your payments so as to not run the risk of losing your property.
Following the draw period is the repayment period. During this time, you’ll repay the outstanding balances you borrowed as well as any additional interest owed. HELOCs are especially helpful to those who are comfortable using their home as collateral and who need to withdraw money over a period of time, such as for a series of renovations.
Real Estate Loans
Also known as mortgages, real estate loans are one of the most beneficial ways for homebuyers to finance a property. Once approved, you’ll sign a legal document called a mortgage note, whereby you promise to repay the loan in addition to other costs and interest.
Construction loans are defined as short-term, higher-interest consumer loans that provide the funds needed to construct a residential property. During the length of the term, your home must be completed. Because construction loans are dependent on the completion of your home project, you’ll need to provide detailed plans, a timeline, and a realistic budget.
Once you’re approved for the loan, you will have the capability to draw money at various stages of the project. For example, unlike other personal loans where a lump sum is paid up front, construction funds are distributed when invoices are due. The funds cover building materials, contractor labor, cost of the land, and necessary permits.
There are different types of construction loans we offer, depending on your needs. They include:
As the name suggests, construction-only loans provide the funds necessary to build the house, but once you move in, you’re responsible for repaying the loan in its entirety. Depending on the amount borrowed, you may be able to repay a lump sum at the construction loan’s maturity, but most applicants will need to obtain a mortgage to ensure financing.
With a construction-only loan, funds are distributed based on the percentage of the project completed before maturity, meaning you only owe interest on the amount drawn.
Renovation Construction Loans
If you’re looking to improve your home, a renovation loan can be a great option. Depending on how you wish to finance your project, you can secure funds from a home equity loan or HELOC. Renovation loans are funded like a construction loan and you only owe interest on the amount drawn.
Mortgages (Permanent Financing)
Permanent financing simply refers to the mortgage once your property is built and your construction loan reaches maturity. It is a real estate loan that includes a fixed term with principal and interest monthly payments. Once construction is complete, the Bank of Old Monroe offers various adjustable and fixed rate mortgage solutions.
Most individuals cannot purchase a car outright; therefore, auto loans are a purchasing option. When you apply for an auto loan from Bank of Old Monroe, you’re agreeing to repay the funds issued plus interest over a specific length of time. Your loan amount is determined by a couple of factors: money you will put down on the vehicle and the vehicle’s cost. The Bank of Old Monroe requires a minimum 20% down.
Known as the down payment, the amount of money you put toward the vehicle’s purchase at signing will be deducted from the principal. For example, if you purchase a car costing $25,000 and are able to pay $5,000 as a down payment (20%), your loan amount will be $20,000 plus interest. Therefore, the greater the amount you pay up front, the less your principal’s total.
Following the determination of your principal, an auto loan functions similarly to other personal loans. You will pay monthly installments based on the principal amount and interest rate until the loan is completely repaid. Then, once all payments are complete, you’ll receive a lien release indicating your vehicle is owned without debt.
Recreational Vehicle Loans
A recreational vehicle loan can help finance the purchase of an RV, camper, UTV, ATV, boat, or other type of recreational vehicle. Working similarly to other personal loan options, all of our recreational loans have competitive rates and allow you to refinance an existing loan for your recreational vehicle. Whether you’re looking to hit the water or hit the road, there’s a recreational loan for you at Bank of Old Monroe.
Apply for a Personal Loan with a Community Bank That Cares
With over 100 years of experience in the lending industry, Bank of Old Monroe is dedicated to our customer’s success. It’s our goal to help you reach yours through personal loans. We provide top-of-the-line hometown customer service to every individual that walks into one of our five locations. When you select one of our personal loan options, you’ll receive flexible and competitive rates that fit your budget. Apply for a personal loan today to start reaching your goals!