Summary
This article explains how loans work, what 'secured' and 'unsecured' mean and how to choose the right one for you.
Loans. Secured or unsecured? How to choose a loan
When you need to take out a loan, you'll have to
- No Collateral Dont Want To Risk Your Home Get Credit With Unsecured Loans
- Makes the case for unsecured loans
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- Introduces the key issues when choosing a personal loan.
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- Good background reading before you take out a loan
- Unsecured Personal Loans. When you are your guarantor and not your home
- Interested in an unsecured loan? This article is good background reading
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Secured loans
You need to be a homeowner to take out a secured loan because the loan will be secured on your home. With secured loans, the lender deals with the Land Registry to place a legal charge on your home, and assuming that you already have a mortgage, the loan company has to agree to take second place to the mortgage as a repayment priority. This means that on the sale of your home the mortgage will be paid off first, and ( online car insurance ) then the loan would follow. You will receive the remainder from the sale once the mortgage and the loan payments have been made.
The key feature of the secured loan that you must remember is that if you are unable to meet the repayments, the loan provider has the right to apply to the courts to take back what ( best mortgages ) they are owed. They will do this by repossessing your home and selling it to get back what you owe them.
This is why it's essential that you don't enter a secured loan agreement lightly, as it could cause ( insurance ) you real problems down the line if you have a change of circumstances. It's best to talk to a professional solicitor or an independent financial adviser if you have any concerns.
Unsecured loans
You don't need to be a homeowner to take out an unsecured loan. You are not ( life insurance quotes ) required to provide any form of security which is why lenders generally reserve the right to lend lower amounts. This is because they cannot guarantee that they will get their money back.
Obviously, if you don't own a home then you have to get this type of loan. It's only the people that own homes that have to make the decision between a secured and an unsecured loan.
With an unsecured loan, you can usually only borrow up to a maximum of £15,000, although it is possible to borrow up to £25,000. The minimum loan generally starts at £500. The interest rate is higher on an unsecured loan because the lender doesn't have any security, so the loan is generally considered to be a higher risk. You could have to pay between 1% and 3% more on an unsecured loan, even more if you have a bad credit history. They could of course reject your application altogether.
Loans may be secured on your home or other property. Think carefully before securing other debts against your home.
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