Which loan is the best?
Most importantly the interest rates on a secured loan are normally a great deal lower than the rates on unsecured borrowing, but they do vary from lender to lender.
There are several advantages to secured loans. First, you can borrow a larger amount with a secured loan than with a personal loan that is unsecured. For example, many banks and building societies will lend up to £150,000 on a secured loan. With a personal unsecured loan, the maximum advance you are likely to get is £20,000 but this could be far less.
Lenders will more than likely take into account your credit score when they set the interest rate for a secured loan. However, they tend to be more sympathetic to borrowers with poor credit scores because the loan is secured against your property which will help keep the rate acceptable.
You can also take longer to pay back the debt – a term of 10 or 25 years is not unusual with a secured loan, as opposed to 5 or perhaps 10 with the unsecured option. A longer term usually means lower monthly repayments, but it’s important to remember that you will pay more in total interest if it takes a long time to clear the debt.
Secured loans are often used to finance home improvements or to consolidate other debts and can be a credit lifeline. This form of lending is becoming more popular by the day and lenders have adjusted to match the increasing demand. Usually the borrower requires the funds to be released quickly and secured lending meets that demand well.
Need some advice?
If you are looking to raise capital from the equity within your property please make contact and one of our fully qualified advisors will be happy to assist.