Secured Loans
Secured loans are those which guarantee the value of the loan against one or more of your personal assets, usually your home. For this reason they are sometimes known as 'homeowner loans' or 'second mortagages', as they are subordinate to the first loan taken out on the property, the mortgage.
By signing a secured loan contract, you are agreeing that the lender can repossess and sell the named asset to satisfy the debt in the event that you are unable to make loan repayments. This 'security' measure, known as 'collateral', often results in lower interest rates than with an unsecured loan.
If you have a good credit history and own your own home, secured loans are often more advisable than unsecured loans because they are cheaper, which means payments are easier to afford. Secured loans are also generally easier to obtain because the security offered means that the lender is exposed to less risk.
With a secured loan, the amount you can borrow tends to be much higher than with an unsecured loan, because the lender has a guarantee that the debt will be repaid. You will typically be able to borrow up to £25,000, although some lenders will consider applications of up to £50,000 or more. Repayment terms are often longer for secured loans, typically lasting between three and twenty-five years. Because you may be charged an early repayment fee if you pay your loan off before the agreed period, it is worth reading the terms and conditions of the loan carefully before signing any contracts.
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