Secured vs Unsecured Loans

What Are Secured Loans?

Advantages and Disadvantages of Secured Loans

• A secured loan is generally seen as an attractive option because you can borrow with a lower interest rate as it is secured against your home.
• You not only get a lower interest rate, but they also allow you to borrow much more than a personal loan would.
• Often used by people with low credit ratings as they would not normally be able to borrow large sums of money. If you are a homeowner with bad credit, these will often be your best option.
• With a secured loan you will get more flexibility with your repayments. For instance, you have the option of much longer repayment periods which means you pay less on a monthly basis.

• There is always the risk of losing your home if you cannot keep up with the payments.
• It’s always important to compare loans and check their terms and conditions, because some could have early repayment penalties.
• Loans can either have fixed or variable interest rates when the repayments could increase.
• LTV limits what you can borrow so it might not be enough.

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What Are Unsecured Loans?

Advantages and Disadvantages of Unsecured Loans

• No risk to your property, and quicker to apply for one.
• They offer the flexibility of when and how you want to repay them. Most of the time this is between one to five years.
• Some loans will give you a ‘payment holiday’, so you don’t have to begin repaying it until a few months into the term.

• The interest rates at the lower and higher amounts of loss can prove expensive. Often the cheapest is the median amount of money, between £7,000 and £15,000.
• The best unsecured loans are only available to those with the highest credit scores.
• If you fail to make the payments, your credit rating could be damaged. If you default on this loan then it will appear in your credit file for six years.
• Similarly, the lender can go to court to try and get their money back.a