Home Loan Secured Against Your UK Property

There are two types of loans: unsecured loans, which need no collateral, and a home loan secured against your property. UK lenders have become more specific about who they are willing to lend to in the future due to the credit crunch, so it's often hard to find unsecured, cheap loans.

Because of the credit crunch unsecured loan providers have increased their charges significantly. If you don't pay back an unsecured loan all you have to lose is a few court cases and threatening letters - which isn't really a powerful tool for lenders to get their money back. The high interest rate on unsecured loans is there for that reason, to try and at least claim some money back if you don't repay. So, you're left with two choices; go for the higher, unsecured loan that you definitely won't get if you need to lend £25,000 or more (or have a bad credit rating) or look for a cheaper home loan secured against your UK property.


Secured Loan Interest and Price

The terms and conditions for a secured loan against your home are actually more straight forward than an unsecured loan. But remember, the amount you borrow, the interest you pay and the term you borrow for is all dependent on the equity in your home. The loan will always be tied to your house, so never take out anything that stretches your finances. As a general rule, loan repayments should only take up 25% of your left over income after all other outgoings, so you won't be left stuck if an emergency occurs and risk missing payments.


Secured Loan Borrowing Amount

When you take out a secured loan the lender has something to take if you default, so they'll be willing to lend you more money than any other unsecured loan provider can. You can often find loans of up to £100,000 in some instances. However, be careful not to take out too much and don't forget you may have a mortgage to pay on top of the loan (the loan in this case is referred to as a "second charge", whereas a loan on a home without a mortgage is a "first charge").


When is a Secured Loan the Best Option?

Normally, if you don't have a glowing credit file, have recently changed jobs or are self-employed, you'll have no choice but to take out a loan secured against your loan. You should only take out a secured loan if you can easily afford repayments (with a substantial amount of cash left over) and you really can't seem to find an unsecured loan provider willing to lend to you.

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