A homeowner loan is simply a loan that is secured by the consumer putting up property as collateral in order to obtain a desired loan amount, or more favorable rates and terms. There are generally two types of homeowner loans. One is the primary mortgage that virtually all homeowners obtain when first purchasing a property. Another is second charges that are loans obtained for significant amounts of money at ideal rates by offering the lender a lien against the borrower's property.

There are many benefits to obtaining a homeowner loan. Secured loans almost always offer more favorable credit terms than unsecured loans. This is because they reduce the risk to the lender. The lender is more protected against loss because homeowners that expose their properties to repossession by the bank are more motivated to pay their debts. If they do not, the lender has a fall-back in that it can repossess the home and at least regain some of the capital invested in the property.

Because of the lower risk from the secured loan, the lender offers the borrower more favorable credit terms and a much better rate. The better the borrower's credit rating, the more favorable the rates and terms offered by the lender. Many consumers opt for homeowner loans to consolidate debt, renovate their property, take extended vacations, make large purchases, and more. Secured loans usually have fewer restrictions as to the use of the funds. This is why they are often referred to as any purpose loans.

While borrowers with good credit appreciate the better loan terms provided by securing debt, borrowers with bad credit often are required to secure loans just to obtain the needed amount. The advantage bad credit borrowers have today is that there is more competition for their business, which has given them greater access to reasonable rates and terms by securing loans.

Debt consolidation, a common purpose of a homeowner secured loan, is a way for borrowers dealing with multiple creditors and high interest rates to lower their interest requirements. By obtaining a secured loan, the borrower can pay off higher rate loans and credit card balances with a much better rate from the homeowner loan. For many people dealing with unmanageable monthly debt, this can help reduce monthly payments, reduce the number of creditor relationships, and improve the long-term financial picture. All of these great benefits are major reasons why homeowner loans are a popular choice for many credit seekers.