Secured loans are a form of personal loans which you borrow against your asset. The asset can be your house or a car. The ownership of the asset passed to the lender until you repay the loan amount including the interests.
Secured loans contain a huge amount of money, generally starting from £10,000. So you can borrow between the range of £10,000 to £500,000. However, the amount that you can borrow will be decided on the value of your asset. If you are providing your house as a security then the amount would be determined by the value of your equity of the house.
The length of the loan and interest rates that you are going to pay will depend on the loan amount you are borrowing, and your other financial situations and credit score.
Types of Secured Loans
These are not really the types of secured loans rather than the name given to them depending upon the asset. If you are putting your house as a security for the loan, it would be known as homeowner loans.
Note: Homeowner loans and mortgage are both different
You can use the Secured Loansequity of your house as a security if you have a mortgage already, and want to borrow a homeowner loan. The amount that you would be getting will depend on the value of your equity.
So if the value of your equity is low, and you don’t want to risk your asset you can consider guaranteed loans instead. They are quick and instantly available loans which you can borrow in a few hours.
Logbook loans are loans which are secured against your car. In this type of secured loans, you have to submit your vehicle documents or V5 logbook to the lender until you pay off your loan. Similar to homeowner loans, the amount that can be borrowed will depend on the value of the car. The amount that you get will vary, and not be as exact as the value of your car.
Pros of Secured Loans
- You can borrow a large amount of money with secured loans than any other form of personal loans
- You can choose a longer repayment term so that you can afford to make repayments and don’t miss any
- Having a poor credit score doesn’t affect your chances of getting a secured loan. This is because you are providing an asset as a security
- Interest rates are lower compared to other forms of short term unsecured loans
Cons of Secured Loans
- Since you are providing an asset as a security, you might lose it if you fail to keep up with the repayments
- When you choose a longer repayment period you get lower monthly instalments. But this also means that you will be charged with a high-interest rate. So overall you will end up paying more if you have a long loan term
- If you decide to pay off your loan earlier than the agreed term, you could be charged with an early repayment fees
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