Compare a secured loan with an unsecured loan

If you are looking for a suitable loan then it is possible you have looked at both secured and unsecured options. The two have subtle yet vital differences and it is absolutely essential you understand these differences before committing to anything. You can ask to speak to your bank's loan advisor, who will help you compare a secured loan against an unsecured loan and also help you work out which is the best deal for your needs.

Usually a secured loan allows a person to borrow more money. The average personal unsecured loan stops at £25,000, where as a secured loan can see a person borrow up to £100,000. However, there is a very good reason for this difference, and that is the fact a secured loan uses something of value as security, collateral. In most cases when a person takes out a secured loan, it is secured on their home. This means if a person continues to miss repayments, there is a very real chance they will lose their home to the bank who has given them the loan. When you compare a secured loan with an unsecured loan, you will see that a unsecured loan is not attached to anything. If you do not pay the repayments on an unsecured loan you can face a County Court Judgement or bankruptcy.

Secured loans also tend to have a higher interest rate than unsecured loans. This is generally because the amount borrowed is considerably larger than it is with an unsecured loan. It is also worth noting that many people who have a poor credit history may have no choice but to take out a secured loan, as they are considered such a high risk for non-payment most banks or financial institutions will want security in the event they do not pay.

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