Secured Loans compared to Unsecured Loans
We get asked quite often, which is better, secured or unsecured loans.
Really there is no direct answer to this as it depends on your own personal circumstances and what works for you.
Let’s have a look here in more detail.
Secured loans offer borrowers higher amounts to borrow compared to unsecured loans.
They are usually secured against your property or another asset that you own.
Lenders normally have lower interest rates compared to unsecured loans as they are securing the amount against an asset or property so the risk is less for them.
Secured loans often come with arrangement fees, which can be added onto the loan, this depends on the lender.
The process to take out a secured loan is usually longer and more detailed then a unsecured loan as there are more checks that need to be done.
A second charge loan/mortgage is a type of secured loan.
This is where as long as you have sufficient equity in your home a lender will lend against this.
The first lender (if you currently have a mortgage in place) will hold a first charge against the property and the second lender will hold a second charge.
Unsecured loans are loans that are usually personal loans which unlike secured loans are not secured against any assets or property.
Lenders will perform a credit check and in some cases the money can be transferred the same day.
Interest rates are usually higher then secured rates as the lender has to protect themselves from any non-payments.
However if you have a good credit score the interest rates can be quite reasonable.
What is needed to take out an Unsecured Loan?
Lenders will perform a credit check to see what your score is, to see if you have any other borrowings and to see if they feel you will be able to afford the loan.
Depending on how high or low your credit score is this will overall determine the interest rate you will pay and the term offered.
Once you have done your research and decide to either apply for a secured or unsecured loan, make sure that you check your current finances and make sure you can afford to pay the loan back.
Don’t borrow more then you need just because it’s available, borrow what you need and then if you need more apply for an additional loan.
Check what the loan will cost you over the full period you take it for.