There are primarily two types of loans in the market – secured personal loan and unsecured personal loan. The former can be availed by putting up something of value as collateral against the loan amount. These loans are specifically meant for homeowners. Unsecured loans can be procured without the need for the borrower to put up any collateral as security.
While unsecured loans are more popular in the UK market as it caters to both homeowners and tenants, secured loans have a wide market too. This is because of the numerous benefits attached with these loans.
Secured loans facilitate a big amount for the borrower. The loan range is between ₤5000 to ₤250,000. The repayment term is between five to twenty-five years. This facilitates better handling of the finances and a chance for the borrower to repay the loan amount with a certain peace of mind. Also, the rate of interest is lower than that of unsecured loans. This is primarily due to the presence of collateral in the case of secured loans. Lenders can recoup the loan amount by selling off the collateral in case of a repayment default from the borrower’s side.
The presence of collateral that allows for a big amount is in itself something of a bane. Borrowers tend to furnish collateral lured by the prospect of big cash. However, most do it without keeping in mind their repayment capabilities. The year 2006 witnessed a record number of collateral repossessions in the UK.
There are several places from where one can get secured loans. There are banks, building societies, private lenders and the online facilities.
Secured loans are probably the best options in terms of choice and convenience for the customer. However, even while availing these loans, once should do so with a certain amount of discretion and prudence. There are a lot of unlicensed lenders in the market waiting to take advantage of unsuspecting borrowers.
The author is a business writer specializing in finance and credit products and has written authoritative articles about personal loans,
Secured loan. He has done his masters in business administration and is currently assisting Shakespearefinance as a finance specialist.
