Finding a loan can be difficult—especially if you have a credit score that perhaps has a few gaps in it. If you own assets of significant value, such as a house or a car, you may want to consider a secured loan as an alternative to a personal loan.
Life can throw you a curveball sometimes, and you may find yourself in need of funds. A secured loan might be a useful option if you intend to consolidate debts from credit cards, overdrafts, or unsecured loans with higher associated interest rates. However, using a secured loan to pay off smaller unsecured debts may be more expensive in the long run with the added interest.
This type of loan is assured against the value of property—collateral—that you own. This might be a home or a car. This makes them secure from the point of view of the lender.
Once you have made an application for a secured loan with a particular lender, they will organise a property valuation by an expert; for example, a chartered surveyor will value your home if it is used as an asset. Once a valuation has been secured, the lender will be in a position to provide a considered offer for the terms of your loan, as well as the amount they are willing to lend.
It is normal for the potential borrower to pay the cost of any valuations, so it is important to factor this in when considering the overall cost.
Secured loans treat the asset in question as security, making them a useful option for those who need funds but have a low credit score. Lenders will look at the value of your property and personal credit history to judge whether you are able to pay them back. Rates of interest tend to be lower for this type of loan, but there may be additional fees. If payment is defaulted, the lender may require you to sell your home to clear your debt.
– Secured loans are tied to collateral and property may be forfeited if you don’t keep up repayments.
– Secured loans may get you a larger loan.
– Lenders may be willing to offer better APR on a secured loan.
– Defaulting on an unsecured loan will damage your credit score, however, you won’t lose your property.
– Your credit score will decide the terms and the APR you are offered on an unsecured loan.
– The unsecured loan market includes a far greater variety of APR rates.
– Missing repayments could put the collateral used at risk. Some lenders tend to take action quickly in order to get their money back, if you fail to make payments.
– Repayments amounts could increase significantly on loans with a variable rate. If the Bank of England base interest rises, your rate will increase too. What would you do if this happened?
– Arrangement fees and other related charges can be high.
– A defaulting on a secured loan will almost certainly have an adverse effect on your credit history, and make it more difficult to arrange other borrowing in the future.
Finding the best secured loan to fit your situation and requirements can be tough. That’s where Bright Compare can help. At Bright Compare, we make sure that you get the best deal every time. Our comparison technology can really put our users right in the driving seat with every financial decision they make.
Our smart comparison technology helps find the right deal that suits your unique situation, and makes sure you get the best quotes in the fastest time. Our website is fully secure and entirely independent and impartial—we are not sponsored by any of the major lenders. We do not sell any user data, and will make sure that you never miss a renewal. Our service is simple, easy, and always accessible. The Bright Compare website is there 24 hours a day to compare secured loans at any time you need to—whether that’s over breakfast, scrolling in the evening, or in the middle of the night.
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