There are two
main types of
loan: secured
and unsecured.
While security
over your home
is not required
lenders often
prefer homeowners
to other borrowers.
It may seem
that an unsecured
loan is less
risky to the
borrower as
the loan is
not secured
against their
house. In reality
you should,
as with any
loan, be vigilant
to meet your
payment obligations
because court
proceedings
used to recover
outstanding
balances will
inevitably take
your assets
into account.
An unsecured
loan can be
used for a variety
of purposes
including for
example buying
a car, going
on a holiday,
home improvements
or debt management
and consolidation.
As the size
of the loan
is generally
smaller than
that of a secured
loan the term
of the loan
will often be
shorter, usually
up to 5 or 10
years.
A secured loan
is one that
is secured on
your property
as a second
charge which
takes second
priority to
your mortgage
(first charge)
in the event
of your property
ever being repossessed.
A secured loan
is usually granted
only if there
is sufficient
equity in your
property. The
presence of
adequate security
means that the
secured loan
will usually
attract a lower
rate of interest
than a unsecured
loan.
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