If you are looking for a loan to raise extra funds, you might be pondering the difference between a secured and unsecured loan and what this means to you. It is very important that you understand the differences between these two loan types:
| Secured Loan | Unsecured Loan | |
| What is it? | It is a loan which is secured against a valuable asset, most often your home. | It is a loan which is not secured against any of your assets, otherwise known as a personal loan. |
| What are the risks? | Failure to make the repayments to your secured loan means that your home is at risk of repossession. | If
your credit history is not perfect then you are likely to have a loan
with a higher than average interest rate, which will make it difficult
to repay. |
| What are the benefits? | Over
an unsecured loan, a secured loan should be able to offer you a loan of
a large amount, over a longer term and with a lower interest rate. | The benefits are that the loan is unsecured as the loan lender believes that you have demonstrated your ability to repay debt. |
| I have a bad credit history. Will I be accepted for this loan type? | If
you are suffering from a bad credit history, you are more likely to get
accepted for a secured loan as the lender has an asset secured against
the loan. | Especially in today’s current economic climate,
only those who have an excellent credit history are likely to get
accepted for an unsecured loan. |