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When it comes to taking out a loan in the UK, consumers can enjoy plenty of choice as well as some great deals from a wide choice of reputable lenders. However, the needs and the circumstances of each consumer can vary, and this means that different loan types may suit different people. Amongst the two main types of loans available in the UK are secured loans and unsecured loans, and these two loan types are designed to meet the different needs and circumstances of today's borrowers.
What is a secured and an unsecured loan?
A secured loan is a type of loan that is secured against an asset, and in most cases this means the home. Secured loans are therefore only available to homeowners. Because the loan is secured against collateral, lenders are able to offer increased borrowing power, which is usually based upon the equity levels in the home. Borrowers can also enjoy longer repayment periods and competitive interest rates, making monthly repayments more affordable.
An unsecured loan is a loan that is based on contract only, and is not secured against any asset. These loans are typically offered on a far shorter term than a secured loan, usually around one to five years. Again, you can get some very competitive interest rates, but you will usually find that the borrowing power is not as high as with secured loans, and the repayments will usually be higher due to the shorter repayment periods offered.
Will a secured loan suit me?
A secured loan may be right for you if:
- You have poor credit history: most bad credit consumers will find it very difficult to get unsecured finance, and therefore a secured loan is often the only option
- You need to borrow a large amount: this will be dependant on the level of equity in your home (the value of your home minus any outstanding mortgage or other loans secured on it)
- You want to keep monthly repayments down and pay over a longer period: most secured lenders will allow you to repay over a far longer period than unsecured lenders, which means lower repayments
However, you should also remember:
- You MUST be a homeowner in order to qualify for one of these loans
- If you are unable to keep up with repayments you could put your home at risk
- This is a very long term financial commitment for most borrowers so you could be repaying the debt for many years to come
Will an unsecured loan suit me?
An unsecured loan may suit you if:
- You have good or excellent credit
- You want to borrow money without risking any asset, such as your home
- You are a tenant or living with family and do not have property against which to secure finance
- You want to borrow a modest sum over a fairly short period (1-5 years)
You should also bear in mind:
- The shorter repayment periods offered with secured finance mean that you may be paying more per month, but also means that your debt will be cleared more quickly
- You may not be able to borrow the amount you need with an unsecured loan if you are looking to borrow a very large sum of money
- You cannot usually get an unsecured loan if you have bad credit
Find the right loan with ease
Whether you are looking for a secured or an unsecured loan it is important to compare a range of options in order to find the right deal for your needs. You can do this with ease by going to our comparison pages where you can access a range of great value secured and unsecured loans.
Show me all secured homeowner loans
Show me all unsecured loans
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