Taking out a secured loan means borrowing money against your assets, traditionally your house or flat. Usually the legal fees and set-up costs mean that the minimum secured loan is in the region of £25,000, but loans can be much greater than that depending on the value of your property. If you find yourself unable to repay your loan when the repayment date comes round, the lender has the right to possess your home. For this reason, it’s definitely worth thinking carefully about all your options before you commit, and to receive good advice.
Why Do I Need to Know About Different Loans?
It’s advisable to be as clued up as possible on the different types of loans available before you commit to one. After all, your personal finances are vital to you and your family, and you’ll want to ensure that you can comfortably repay your loan.
Why Would I Choose a Secured Loan?
You might find that a secured loan is the right option for you if you are looking to borrow a large sum that a different kind of loan – for example, a short term loan – will not allow. Secured loans can have repayment periods of up to 25 years or more, so if you feel you need longer to pay the money back, you might want to opt for a secured loan.
Another important consideration is that interest rates on secured loans are often lower than those of unsecured loans. This is because the bank reduces its risk by ensuring it can claim your assets if you default on payments. If you repay on time, this can have a positive effect on your credit record, but defaulting on a large loan can damage your credit score, cost you a lot of money and even lead to the loss of your home.
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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk