Is a secured or unsecured loan right for you?

Most people would recognise a personal loan as an unsecured loan which does not require you to set any particular asset against the amount you borrow. A secured loan, on the other hand, has to be set against the value of something you own; nearly always your property. However there are benefits to opting for a secured loan.
Because the loan is secured against your home, the interest rate is normally cheaper than an unsecured loan and you are normally able to borrow more. Typically you can borrow anything from £3,000 to £50,000 although some lenders provide finance up to £100,000. Also you can borrow the money over a longer repayment term which means you can reduce your monthly payments to an affordable amount by stretching the loan over a longer period. A secured loan is a good way to borrow money for expensive items such a home improvements. Secured borrowing can provide a solution for homeowners who have been declined an unsecured loan because of their credit rating.
However you need to bear in mind that a secured loan gives the lender a claim on your home and if you don’t keep up the repayments you could lose your home. Also, not all secured borrowing is cheap with some lenders charging higher rates than unsecured borrowing. It’s important to shop around and get the right type of loan for your particular circumstances.

January 31, 2009 at 7:04 pm | Loans General Info | No comment

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