Secured loans
What is a secured loan?
There are two types of loans, secured and unsecured. Most people have previously
used a form of unsecured borrowing, for example a personal loan, car loan or credit
card. However, a secured loan is a loan whereby the lender secures the loan against
your assets and uses these as collateral for the loan. This is usually the money
or equity available in your property.
The loan is therefore secured against this collateral and in the event that the
borrower defaults on payments, the lender can take possession of the asset. The
lender can then use this collateral to satisfy the debt by selling the asset to
repay the debt.
A secured loan can have a lower rate of interest compared to an unsecured loan.
This is because the risk to the lender is reduced when the debt is secured against
your assets (e.g. your property) so they are willing to charge lower interest rates
over the term of the loan.
It is also more likely for people to borrow larger amounts and repay them over a
longer term, with a secured loan. This may be an amount from £5,000 to £100,000
with a secured loan and usually you can choose to repay over a period of up to 25
years.
How could I use a secured loan?
Secured loans are often for amounts in excess of £5,000, so they can be useful
if you're planning a major home improvement project such as a loft conversion, extension,
new kitchen or bathroom.
It is also possible to use a secured loan to consolidate existing debts. The secured
loan is taken out in order to settle outstanding payments on credit cards, store
cards and other loans. This is usually done so that the monthly repayment is reduced
and the debt becomes more manageable.
How can I apply for a secured loan?
It is possible to apply for a secured loan directly to a specialist loan company
or bank. Alternatively, a loan broker will compare secured loans and help you decide
on the best loan for you. At Promise, we may also be able to assist. If you would
like to speak to one of our team in order to help you further, just fill in an online
enquiry form and we'll call you
right back - or call us free now on 0800 083 9640.
Promise can put you back in control