What Is A Secured Loan?
You can borrow money against an asset you own, usually a house or car. Secured Loans are very popular for with people who dont have great credit and want to use a lender who has competitve APR. They are a common option for people who want to loan a large amount, such as in excess of £10,000 over a longer term. Remember Secured Loans do carry the risk of you losing the asset you secured against the loan.
The Difference Between Secured & Unsecured?
A Personal Loan (or Unsecured Loan) isn’t attached to your home or any other asset. The reason being, theres no asset for the lender to claim if you fail to repay the loan amount. This means its usually only people with good credit that get approved for Personal Loans.
Just as with a Secured Loan, when you take out a Personal Loan you’ll agree to certain terms for repayment, including an interest rate and how long you’ll have to pay back the debt. Credit cards are another option for a line of unsecured credit.
What If I Default?
If you default on a Secured Loan, the lender may have the legal right to take possession of your home or whatever collateral you put up. This means they can forcibly sell it to regain the money you owe them. However, if you do find your struggling witht he repayments you maybe able to renegotiate the agreement if you contact them immiediately and explain your situation and the issues your having.
A default is also normally recorded on your credit report which can effect your ability to secure credit in the future.