GimmeDosh can also offer secured loans. If you would like a loan secured on property, please fill in your details below.
It is important to first define the fundamental difference between secured loans and unsecured loans.
Secured loans have to be guaranteed against an asset, e.g. a property with sufficient equity. An unsecured loan is provided by the lender based on the personal and financial information from the borrower.
Secured loans are normally for a much higher amount (from £25k to £250K) than an unsecured personal loan (maximum is £25K). Obviously the reasons for choosing one or the other type of loan are linked to the main purpose of getting a loan.
A major home improvement project or ground floor extension would normally cost a lot more than the maximum unsecured loan available in the market. However, a new bathroom, kitchen or car could be financed by an unsecured loan.
The main criteria for selecting one over the other are listed below.
• Advantages of secured loans are:
1. Lower Interest Rates (from 3 to 8%)
2. Higher Loan Amount (up to £250k), based on the available equity in the property
3. Longer Term to pay (up to 30 Years)
4. Lower Monthly payment (due to the longer term)
5. Borrowers with a poor credit rating can be accepted by some lenders due to the property equity being offered as security.
• There are two main Disadvantages:
1. A charge is placed on the property by the secured loan provider
2. The property can be repossessed if payments are not kept up.
For many homeowners the advantages outweigh the negatives if they are looking at borrowing relatively large amounts for major projects or consolidating some or all their unsecured debt, i.e. personal loans, credit cards and overdrafts.
Secured loans can also be guaranteed against another form of asset, e.g. a car. These types of loans have become more popular recently, especially due to the online expansion of lenders using a person’s car as security.
How to Decide on a Secured Loan
Although unsecured loans are useful for raising money for small to medium sized projects (up to £25K), many homeowners today have sufficient equity in their property to consider a secured loan as an alternative, especially for financial requirements above the maximum available through an unsecured loan.
Secured loans can be the right choice for some homeowners wanting to borrow larger amounts than £25K and who want to have much lower monthly payments and interest rates (APRs) than those provided by unsecured loans.
One of the most important factors is to select a reputable lender in order to be sure of getting the best interest rate, terms and after sales customer service.
There are other factors that must also be considered:
• It may be better to opt for a re-mortgage than a secured loan, as this would potentially provide the lowest available interest rate
• It may be more costly to borrow on a secured basis over a longer period for loans up to £25k, even at the lower rates available today. This is because when a borrower is repaying a secured loan at say 5% over 20 years, it will end up being much more costly than an unsecured loan at 10% for a 5 year term.
Always use a licenced credit broker. Gimmedosh holds a consumer credit licence from the OFT.