Loan Guide: Secured vs. Unsecured

Until recently, a loan secured against your property was seen as the cheapest deal and probably the only viable option on the market. Although the former is still somewhat true, secured loans aren't always ideal for your circumstances. You may be slightly put off by the rate from unsecured loans, but this doesn't mean a good deal isn't out of the question.


Loan Products Secured Against Your Home - Pros

  • Lower interest rate than unsecured loan.
  • Likely to have a longer borrowing period in some cases compared to unsecured loans.
  • Easy to secure a larger amount of cash compared to unsecured loans.
  • Available from most providers and dotted all over the market.

Loan Products Secured Against Your Home - Cons

  • A good credit rating is required for a secured loan.
  • You have to be a UK homeowner - companies are unlikely to offer an alternative.
  • You can lose your home if you don't keep up with repayments.
  • Extra financial strain if you're taking out a mortgage and paying out for another secured loan each month.


Unsecured Loan Products - Pros

  • Available to most customers, adverse credit rating loans are easily available.
  • No need to be a homeowner.
  • No risk of losing any kind of asset as the loan is not secured on anything.
  • Variety of loan options available, such as payday loans, guarantor loans or logbook loans (the car, however, would be the asset in this case and could be lost if repayments aren't kept up).


Unsecured Loan Products - Cons

  • Notoriously higher interest rate compared to secured loan products.
  • Limit companies offering unsecured loans to people with bad credit - interest rate for bad credit unsecured loans is very high.
  • You can't borrow as much on an unsecured loan as a secured loan, and the term of the loan is normally shorter.
  • Inability to repay the loan can result in thousands of pounds worth of additional fees and, in some cases, court action, so an unsecured loan is not entirely risk free.

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