Secured Loans

Secured Loan

Choosing between a secured loan and an unsecured loan will be a key decision made by anyone in the market for a credit product in the UK. When you decide to take out a loan you need to decide a few things. How much do you need? What do you need the money for? How are you going to pay it back and when?

The answer to all those questions will greatly inform what type of secured personal loan you decide to purchase. If it is a short term, small sum you might be able to get it unsecured. If however you want a fairly large amount and you wish to spread the repayment period over a more manageable time you will probably require a secured loan.

Asset Backed Products

Secured credit products are loans which are backed by the applicant's assets, usually their home. This addition of value to the agreement will often make lenders more forthcoming in the amounts they are prepared to offer and the conditions they will apply to the loan. If you are looking for a large sum of money a secured loan is probably the way to go. It will also allow you to pay the amount off over a longer period of time which can be great if it is for an investment that will take a number of years to return money. For example if you are starting up a new business a secured loan can give you the capital you need to get things going and enough time to pay it back.

There is, however, one thing that makes the use of an asset backed product potentially risky for the buyer. As it is secured against your home missed payments put your house in danger of being repossessed. This extra piece of risk may make the idea of a secured loan a gamble too much for some buyers. If you have faith in your ability to honour the payments, however, it is a great way to get a lot of cash quickly.

Secured Vs Unsecured

The loan you eventually decide to go with will rely greatly on what you feel your earning power will be in the future and what your borrowing history has been like in the past. If you have a bad credit rating there is a very good chance that you will not be able to purchase an unsecured loan of any sort as financial institutions will want more assurance that payments will be forthcoming. The application will need to be backed with something solid so a secured loan may be your only hope, particularly if you want a large amount of capital.

If you just want a small amount of money which you can pay back quickly, however, you may be able to get it without have to go for something secured. If the amount you need is very small you may even be able to purchase it using a credit card or overdraft. These will, however, not give you the key advantage of a secured loan which is that they offer you a large amount of capital.

It should also be kept in mind that, if you find yourself owing multiple debts to various creditors and decide you want to enrol in a programme of debt consolidation, credit which has been secured against an asset will not be liable to be consolidated. While none of us plan on needing to consolidate debts in the future the possibility could arise. If you are struggling with secured debts only it can result in that particular door being closed to you.

Making Your Choice

The key decision, of course, can only be made by you and your bank. An unsecured borrowing offers the advantage of asset protection. If you default on an unsecured debt the worst that will happen is your credit rating will come down. While that's still a pretty unattractive proposition it is most probably preferable to losing your property.

That being said, you shouldn't go into a credit agreement with the intention of defaulting. As long as you are confident of your sustained ability to repay the debt in full, then why not go for a secured loan? The amount of money you get is higher, the rate of interest sometimes better and the length of time it takes to pay back longer. As long as you can manage it responsibly it is a great credit product.

Taking out a secured loan can sometimes feel like a daunting prospect as it means putting your property on the line. If you are capable of paying it back in full and making your payments on time, however, it is a brilliant way to get a large amount of money fast. So, if you're looking to borrow, try searching now for the best rates on asset backed credit.