Loans. Should you take a secured or unsecured loan?
If you want a loan, one of the first issues you'll have to decide is whether you want a secured or unsecured loan. The decision is rarely straightforward so here's a few pointers.
Let's start off making sure you know the difference
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With a secured loan, you give the lender the right to register a legal charge on your property at HM Land Registry. As most people have a mortgage that is secured by a first charge on your property, the loan ( life insurance quotes ) company agrees to take a charge that ranks behind the first charge. This means that if your home is sold, then the sale proceeds would first be used to repay the mortgage and then the remainder becomes available to repay the second charge (and any other registered charges).
Then, when all the charges have been repaid, you receive the balance of the sale proceeds. ( home insurance ) The central point you have to appreciate about any secured borrowing, is that if you default on the repayments, then the lender automatically has the right to apply to the Courts to repossess your home and sell it to recover the money they are owed. In this context, you need to think very carefully before you agree to such a charge.
With an unsecured loan, you don't provide the lender with any security. As such, the loan ( remortgages ) becomes a more risky venture for the lender as the lender has no automatic route to recover what it is owed.
You will appreciate therefore, that unless you're a homeowner you don't have to decide between a secured or unsecured loan. As you have no property, you could only qualify for an unsecured loan.
As a general guide, unsecured loans are available from £500 up to £15,000 (sometimes £25,000) and ( cheap car insurance ) the repayment periods range from 3 to 12 years. As these loans are more risky for the lenders, then on a like for like basis, they charge a higher rate of interest compared to a secured loan. Interest rate premiums of between 1% and 3% aren't unusual and if you have a poor credit record your application is quite likely to be declined.
Loans may be secured on your home or other property. Think carefully before securing other debts against your home.
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