What’s the difference between a secured loan and unsecured one?

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Confused about your next loan?

An unsecured loan is a loan made to a party without any particular asset offered as collateral/security. A secured loan on the other hand is secured on your property, which has very different implications.

Unsecured loans are usually for small amounts but can be up to £25,000. The loans are generally repayable over a term of between 1 to 5 years – normally on fixed interest rates.

If you have an unsecured loan, this means that if you become unable to repay under the terms of the loan, whilst you will still remain liable under the terms of the agreement, the lender does not have the immediate right to take possession of your assets. They can however apply for a Bailiff’s order to come and take goods to the value of the outstanding loan via the courts.

If you take a Secured loan, this is in effect a 2nd mortgage or 2nd charge.

The sum lent can usually be much greater, dependent on the financial circumstances of the borrower and the amount of equity available in the house it is secured against. Secured loans are generally available from as little as £3,000 and interest rates are generally much more competitive than unsecured loans.

Secured loans may be for a period of up to 30 years or more and because there is some security offered by the borrower, the risk to the lender is much less. Interest rates are therefore, usually, much less, although interest rates might be variable and dependent on external factors.

The mortgage lender generally has the right to take possession of the property if the loan goes unpaid or if the terms of the agreement are not met they have the right to sell it. This is usually referred to as being in ‘default’ or ‘forfeiture’. This added ‘security’ reduces the risk to the lender and it is therefore usual for a secured loan to be cheaper with interest payments being lower to reflect the lesser risk.

If you have a weak credit history you are more likely to obtain a secured loan than an unsecured loan.

Need some advice?

If you are looking to take out a new loan please do make contact and one of our fully qualified advisers will be happy to help.

Flexible secured lending

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Second charge lending has many uses and one of the advantages of this type of loan lies in its flexibility.

It may be the case that those who need to raise funds are not aware they can do so through a second charge which is, of course, where advisers and brokers come in. This type of lending can be suitable for a far wider range of situations than many realise.

There are some very clear benefits a secured loan can offer when used correctly, which could well improve borrowers long-term financial prospects. Although consolidating debt is not always the right answer, a secured loan is often a suitable option given the lower interest rate charged when compared to an unsecured loan.

Loan choices increase

It is, without doubt, secured lending popularity is increasing daily. Second charge mortgage completions have increased at a rapid rate over the last 3 years since regulation.

This type of lending is quick and easy if you own a property, lenders are increasing their product portfolios at a rapid rate. An average case when presented will complete in approximately 15 working days and sometimes even less. As you can see this is so much quicker than the standard re-mortgage.

Always seek professional advice as to its suitability for your needs. 

We are seeing different lending plans emerge on a monthly basis and this can only be good news for the borrower. Interest rates and fees are reducing as lenders see this market as a growth area in the longer term.

Need some help?

Please don’t hesitate to contact if you require any assistance raising funds, one of our advisers will be happy to assist.

Borrowing money is very confusing.

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Raising funds or borrowing money at any time in life especially nowadays can be very daunting and expensive if you get it wrong. There will be various reason you need to raise cash and many options open to the majority.

First piece of advice to heed is to get professional advice as the wrong loan over a period of time could cost thousands more than you need to pay.

Generally, a second charge or secured loan will be cheaper than one unsecured but again do seek advice as this is not always the case. Using a reputable broker will help eliminate a lot of the questions as they are experienced with all types of lending.

A second charge mortgage provides an extremely useful alternative where consumers want to raise additional funds but do not want to change their existing first charge mortgage – especially if there would be additional costs in doing so.

There are some very clear benefits a secured loan can offer when used correctly which could well improve borrowers long term financial prospects. Although consolidating debt is not always the right answer, a secured loan is often a suitable option given the lower interest rate charged when compared to an unsecured loan.

Could this be useful to for you?

  • Fast completion
  • Low interest rates
  • No need to change original mortgage
  • Loan terms to suit majority of needs

The broker

These days due to the vast choices open to the prospective borrower it is vital they get a professional adviser to point them in the right direction. With so many loans and re-mortgages available anybody contemplating taking out loan would be very well advised to seek broker advice.

Help required?

If you are looking to raise money from the equity within your property, please make contact and one of our advisers will be pleased to assist.

Could this be the answer to your money worries?

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Many home owners these days are looking for ways to raise capital which is safe and cost effective. Over recent years property values have increased substantially, many home owners will be pleasantly surprised to see the current value of their property.

In the majority of cases it is more cost effective to raise a loan using the house as security even if you have a mortgage secured against it already. An unsecured loan from a high street lender can be very costly indeed.

As an example if your property is currently valued at £220,000 and your current mortgage is £120,000 you have £100,000 equity.

There are many good quality secured lenders who would be interested in a second charge loan/mortgage on the equity within your home. The plus side of all this is the costs are affordable and can be set to your budget.

When you look at the so-called payday lenders and the interest rates they charge you will see the value this type of plan offers.

3 good reasons a second charge mortgage may fit your needs

  • Your credit history may well not be so good now and you want to borrow to let’s say extend your current property, this could be the cheapest solution.
  • You may be self-employed and having problems raising finance, this route could be the perfect solution by utilising your property.
  • Some lenders will allow overpayments and early total repayments which can save a large amount of money on interest charged.

Need some assistance

If you think this type of loan could assist you in your future planning it is very important to ensure you get the right one to suit you. There are many different lenders offering numerous second charge loans so please do call our advisers who will be happy to help you achieve the correct loan for you.