Secured loans Vs Unsecured loans – how do they differ?


The 2 main types of loan category are the secured loan, also referred as homeowner loans, and the unsecured loan, otherwise known as a personal loans. They both provide you with the finance you need, but as well as being used for different purposes they are both arranged and structured much differently.

Secured loans – homeowner loans

Here are the main points you need to know about secured loans:

  • Like a mortgage, they are secured against your home. This means that in the event you didn’t pay back the loan or you defaulted on your loan repayments then lender could repossess your home to pay of what is owed.
  • Secured loans are generally for larger amounts from £5,000 plus. The amount you can borrow will depend on the amount of equity or security you have in your home, and how much you are able to afford to repay back.
  • Secured loans are only for those who have a property they can use as security and are not available for tenants.
  • Secured loans are generally arranged via brokers who arrange and facilitate the loan on your behalf. They handle all aspects of the application and will liaise with the lender and deal with any issues along the way. These brokers charge a fee for this service that can be in the region of 8 – 12% of the total loan amount.
  • Secured loans can be arranged on residential homes and buy to let investment property.
  • Available for both good and poor credit applicants.
  • Poor credit applicants may find it easier to get a secured loan when compared to an unsecured loan due to the added security provided to the lender. Often poor credit borrowers will be accept for a secured loan if they have been refused a regular unsecured personal loan.
  • In most cases a secured loan requires that your home is valued to ensure you have adequate security for the lender. Loans can be issued up to 95% loan to value with a few select lenders.
  • Secured loans can be repaid for up to 25 years or perhaps even longer depending on the lender and the age of the applicant.

Unsecured loans – personal loans

Here are the main points you need to know about unsecured loans. From these points below you’ll be able to see how they compare and differ from the secured loan option as described above.

  • Unlike a secured loan, unsecured loans do not require any security and are available to both homeowners and tenants.
  • Unsecured loans are generally available for amounts between £500 – £25,000. The amount you can borrow will depend on affordability and your credit rating and score.
  • Unsecured loans are generally available for 1 – 7 years.
  • Payday and instalment loans are also unsecured loans which provide smaller loans with quick repayment options.
  • In the event you had financial problems and were unable to repay your loan or you were unable to meet the monthly repayments, then unlike a secured loan the lender wouldn’t be able to repossess your home. However both options would have severe consequences on your credit rating and ability to get a loan or credit again in the future.
  • Unsecured loans are also available for both good and poor credit applicants.

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