Benefits of secured loans over unsecured (personal) loans

What is a secured loan

Secured loans are only available to people that already have a mortgage.

Secured loans, like mortgages, are loans secured on a property. Secured loans are available for any purpose, including: debt consolidation, home improvements, cars, and weddings.

What is an unsecured loan

A personal loan and an unsecured loan are the same thing, but providers use the different names to describe the same product.

To apply for a personal loan you do not have to be a homeowner and the loan is not secured against any of your assets. Instead, a personal (or unsecured) loan provider will base their decision on granting you a personal loan by using your personal credit history. This is verified by a credit check to determine your credit rating.

Reason’s to take a secured loan instead of a unsecured loan

Secured loans are easier to obtain. As the loan is secured on your home it is not necessary to have a perfect credit score as the lender has the additional security of knowing their advance is guaranteed by your property.

Larger amounts may be borrowed: The maximum unsecured loan is £25,000, secured loans may be taken out up to (and sometimes over) £75,000. The amount that can be borrowed is dependent on the amount of equity in your property.

Lower monthly repayments: Monthly repayments are generally lower with a secured loan. This is primarily due to the fact that secured loans may be taken out over a longer period of time.

Borrowing over a longer period. Secured lenders prefer loans to last longer to help offset their hefty set-up costs, usually from five to 20 years. Unsecured lending is usually one to seven years. Borrowing for longer does reduce the monthly repayments, but substantially increases the total interest repaid.

The downside of taking a secured loan

The main risk involved with taking a secured loan is that if you fail to keep up with the monthly repayments you may lose your house.

However this is not the only issue that needs consideration when thinking of taking out a secured loan. Secured loans are often taken out for longer periods of time than unsecured loans so although monthly repayments may be smaller, the total amount repaid may be considerably more than for a shorter term loan.

The period you secure a loan for will often depend on the amount you can afford each month, and is one of the most important considerations.

Conclusion

The choice of which type of loan meets your needs may be decided by your personal circumstances, the amount you wish to borrow, how much you can afford each month and your credit score.

If you do have a choice between secured and unsecured borrowing the information above should help you decide which is the best choice for you.

Tim - The Home Loan Shop

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Self Employed loans

If you operate a business as a sole proprietor, partner in a partnership, independent contractor, or consultant, you are considered to be self-employed.

Your ability to obtain a loan and the rate you are offered hinges on whether you have certified accounts or no proof of income. Another factor is whether you go for a secured or unsecured self-employed loan, whether you offer your house as security on the loan or not.

Self-employed loans used to be difficult to find and expensive. However, with more people working for themselves, self employed loans are more widely available and more affordable.

If a secured self-employed loan seems attractive The Home Loan Shop can help you select the loan that suits your individual circumstances. Our experienced and considerate team of loan specialists will work on your behalf to ensure that the self-employed loan we recommend will fit as closely as possible to your requirements.

The Home Loan Shop - Secured Loans

Homeowner Loans

A home owner loan is a sum of money borrowed in addition to your mortgage. Just like a mortgage a homeowner loan is also secured on the property so you must keep up the repayments to avoid losing your home. Homeowner loans are also known as secured loans.

There are homeowner loans for many different purposes, including: debt consolidation, home improvements, cars, and weddings.

Any amount from £5,000 to £250,000 can be borrowed but you must be over 18, a UK resident and a homeowner.

Secured loans tend to have a lower rate of interest than unsecured loans however your home may be at risk if you do not keep up repayments on a loan secured on it. As a result, it is always worth considering a payment protection plan which will cover your loan repayments should you find yourself unable to pay for whatever reason.

The Home Loan Shop

Home Improvement Loans

A home improvement loan is a loan secured on your home, the purpose of which is to undertake improvements to your property.

With a home improvement loan you can borrow from £10,000 with relatively low monthly repayments compared with other types of loan. Home improvement loans secured on property can be repaid over a period of between 3 years and 25 years.

With a home improvement loan, it might be possible to afford the extension, new kitchen, bathroom, conservatory, landscaped garden, redecoration or other upgrade to your home, so you can add value to your property and save moving costs too.

As with any type of secured loan your home may be at risk if you do not keep up repayments on the loan. As a result, it is always worth considering a payment protection plan which will cover your loan repayments should you find yourself unable to pay for whatever reason.

The Home Loan Shop

Personal Loans

A personal loan and an unsecured loan are the same thing, but providers use the different names to describe the same product.

To apply for a personal loan you do not have to be a homeowner and the loan is not secured against any of your assets. Instead, a personal (or unsecured) loan provider will base their decision on granting you a personal loan by using your personal credit history. This is verified by a credit check to determine your credit rating.

However, a personal loan usually comes with a higher interest rate because the lender is taking a bigger risk. This risk factor also means that your finances have to be in fairly good order to qualify for the loan in the first place.

The Home Loan Shop

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Debt Consolidation

Debt consolidation is the term used when a large loan, called a consolidation loan, is taken out to pay off several smaller loans, credit cards or other credit commitments and merges them into one larger loan. This usually means that the borrowers payments are reduced over the short term, making a consolidation loan more manageable than several individual loans. However, the borrower will be making payments over a longer period of time.

If you have many credit commitments then a consolidation loan can make your day to day financial situation more comfortable and although a consolidation loan will probably be more expensive in the long run it will help you get back on track.

The Home Loan Shop

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Secured Loans

Secured loans, like mortgages, are loans secured on a property.

Secured loans are available for any purpose, including: debt consolidation, home improvements, cars, and weddings.

Secured loans tend to have a lower rate of interest than unsecured loans however your home may be at risk if you do not keep up repayments on a loan secured on it. As a result, it is always worth considering a payment protection plan which will cover your loan repayments should you find yourself unable to pay for whatever reason.

The Home Loan Shop

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