Secured or unsecured loans – which is right for you?

When it comes to getting a loan there are a number of choices available, but all loans come under one of two categories, which include the secured and the unsecured loan. There are some key differences between these two loan types, and it is important to ensure that you choose the right loan for your needs based on your circumstances and preferences. Some people will find that they are eligible for both secured and unsecured loans, whereas others may find that they are only available for one or the other. There are pros and cons to both secured and and in order to ensure that you get the right loan for you it is important that you look carefully at both loan types to determine which is most likely to suit your needs. By doing a little research and learning more about the two types of loans you can see which is going to match your needs, and also which you will be eligible for.
one that is secured against some form of asset, and this is usually the home. This means that in order to qualify for a secured loan you will need to be a homeowner, and you will usually need to have some level of equity in your home. You can work out the equity by deducing the outstanding balance of your mortgage or other existing secured loans from the market value of the home – the remaining figure is the equity.

With a secured loan you will usually find that the borrowing levels are far higher than with an unsecured loan, although the exact amount that you can borrow will depend on your equity levels, financial status, credit rating, and a number of other factors. In addition to this the repayment periods are usually far longer, and this means that you have more time to repay the loan, which can help to keep your monthly repayments down.

Another benefit of a secured loan is that they are often available to those with damaged credit, because the secured nature of the loan makes it a lower risk for the lender. However, there are some risks involved with these loans, and this includes the risk of falling into negative equity if house prices fall, and the risk of losing your home if you fall behind with repayments.

An unsecured loan on the other hand is one that is based on contract rather than being secured against an asset, and this means that you do not risk your home if you fall behind on repayments, although your credit rating will obviously be affected. Whilst the risk is lower with an unsecured loan, you will generally find that the borrowing power is not as great as with an unsecured loan, the repayment terms are shorter, and you will usually need pretty good credit to quality.