Posts tagged ‘secured loans’

Secured Loan Vs Unsecured Loan

Secured loans or unsecured loans are the options available for the people thinking to take a loan, although many of us arrange for the unsecured personal loans.

As the name suggest, secured loans includes some kind of surety from the borrower’s side to the lender as a risk for the loan. Generally, borrowers risk their property and the lender gets the right of the ownership of that security if the borrowers fail in making repayments of the loan as per the loan agreement between them.

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Since we mostly hesitate to put our homes as collateral, there are certain benefits of taking a secured loan. For example, the loan reduces the risk of defaults by the lender that usually depicts a lower rate of interest or a long period of repayment.

The key difference between a secured and unsecured loan is that you can possibly borrow a bit higher amounts through a secured way.

Lenders do not hesitate in rendering higher sums if they know that you have given a security over your property and the loan possibly get arranged up to £100,000, but at that time you have to put all the proofs about your home before the lender.

The repayment of the borrowed amount is made on the monthly basis as agreed in the terms at the beginning that will usually ranging between 3 to 25 years. You should check the policy of every individual lender before taking the loan because you might have to pay the penalty charges for the early payment of the loan amount.

Around 90% of the loans fall in the category of unsecured loans. These loans are free from the placement of any security and here comes the trust of the lender on your repaying ability for the debt. Normally, higher interest rates are charged on the unsecured loans and repayment period is shorter i.e. 0 to 5 years. These loans generally comprises of payday loans, personal loans etc.

Usually people prefer taking the loan with fixed interest rate. This means the interest rate will be same for the entire loan term, in spite of any changes made in the bank base rate.

Your accurate budget depends upon your monthly repayments. Your monthly repayments are determined depending upon the fixed rate mortgage. Similarly fixed rate personal loans determine your monthly repayments and then your further budget get prepared.

But, while going through the variable interest rate, you will see the linear rise and fall in your repayments according to the changes in the bank base rate.

Whatever option you are choosing for your loan, you will need to do your calculation and go for the profitable one.


December 29, 2008 at 11:23 AM Leave a comment

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