If you’re looking to take out a loan, you typically have two main options. These include secured and unsecured loans. There are pros and cons to both options, but unsecured loans do tend to be the most popular. So, if you’re interested to know more about secured loans, below you’ll discover everything you need to know.
What is a secured loan?
A secured loan requires some form of collateral in order to receive the money. This is typically your home, but it could also include other assets such as a car or valuable jewellery and items.
If repayments aren’t made, the creditor can take away your home or whatever was used to secure the loan, in order to repay the debt. So, it’s basically less risky for the lender.
What are the benefits?
There are numerous benefits of taking out a secured loan through companies such as Ocean Finance. Firstly, they typically provide much larger sums of money. You can borrow anything from £10,000 up to a staggering £100,000. You don’t get this option when you’re taking out unsecured loans, as the maximum you can borrow is usually up to £25,000.
Perhaps the biggest benefit of a secured loan is the lower interest rates. As unsecured loans are riskier for the lender, they reflect this in the interest rates they charge. With secured loans on the other hand, the lender already has security, so they allow much cheaper rates of interest.
They’re also much easier to get accepted for. You may not need to undergo the same level of checks and having bad credit won’t necessarily impact you either. The repayments are also often spread over a longer period of time, making them lower and easier to handle.
Is it right for you?
So, now you know the benefits, could a secured loan be the right option for you? Well, if you’re looking for a large sum of money at a decent interest rate, it absolutely could be. However, you do need to factor in whether you will comfortably be able to make the repayments until the end of the agreement. If not, you could stand to lose everything, especially if you’ve secured the loan on your home.
So, secured loans do come with a lot of benefits compared to unsecured loans. However, the risks are greater to the borrower. Therefore, you’ll need to think carefully before you take out a secured loan, especially against your property.