Secured Loans

Secure Loan

Getting a secure loan or even a secured loan for poor credit might be the right move if you need some extra credit in the UK. Taking out a loan is part of the way most people in the UK handle their finances these days and as long as you can pay them back properly they are totally secure. Most people who take out loans prefer to do them on a non-asset backed basis - i.e. the borrower is not required to put up any item of collateral in order to get the terms they want. The idea is that it is better to risk their credit than an item of property.

Though this may be the case sometimes it does not take into account the problematic elements involved in unsecured debt and the many benefits of a secure loan. In order to give borrowers in the UK a better understanding of the entire loan market this article will detail some of those benefits and how they might help you out. Taking on a debt that is secure due to the addition of collateral to the agreement is often the best course of action for a number of reasons. Make sure you consider that before you decide which credit product to use.

Secure Vs. Unsecure

The main reason people cite unsecure debt as preferable is that they don't have to put any property on the line. The worst thing that can happen is they damage their credit rating very badly but even if this happens they will not have to hand over their property to the lender. Therefore, the thinking goes, unsecure lending is a better option than a secure loan, where your property has been put on the line. What this does not take into account is how the terms of these two loan types differs and how much easier a secure loan can be to handle.

As an unsecured lender is relying simply on your desire to stay arrears-free throughout your payments, they hold no real security in the agreement. Therefore they will want the debt paid off as soon as possible and at the most expense to the borrower. This means high interest rates and short terms of repayment as these are the only things which can guarantee their security in the agreement. Those who take on a secure loan will find their agreement might come with much more beneficial terms and conditions.

For example, when you have property up as collateral on a loan the lender will be much more open to giving you a long term for your repayment. This means your budget can be much less tight and you have much longer to repair arrears should they occur at some stage. The interest rate will also be lower as the lender is not so eager to make as much money on the agreement in as short a time as possible - they know the entire agreement is secure so will be more relaxed with getting repaid. The actual month to month payments will be smaller too, giving the secure loan borrower even more ease of budgeting.

The Capital Amount

These benefits may not be the only reason for taking on a secure loan as opposed to an unsecured debt. You may find, either due to poor credit history or the size of the product you want to buy, that an unsecured loan does not fit your purpose. Lenders are slow to grant unsecured credit to those with bad ratings. Also, the capital amount that they are ready to lend to any customer - good rating or bad - will never is as high as the amount they will hand over should that customer offer an asset to secure the product.

The Collateral

Deciding on the piece of collateral you want to put up is not always an easy task. Generally speaking borrowers will put up their home for this purpose and, obviously, this is a big risk. Then again, a secure loan backed by a property as large as a house will come with high capital and a decent rate of interest, provided you have an OK credit rating. You could also consider putting up a car, boat or other large scale vehicle as security for the agreement. Anything below those kinds of values, however, is unlikely to be accepted by a reputable lender.

Though most people in the UK will quickly answer unsecured debt if you asked them what kind of debt they would prefer to take on, there are many, many advantage to secure lending which are worth considering. A secure loan will come with a longer term, lower interest and a higher capital amount, so for those looking to make a big purchase they may be the best option. If you are taking a loan out, think about an asset backed product.