Navigating the world of lending can be a tricky business, particularly if you’re feeling the pressure of time. However, it’s best to be informed before you make any kind of financial decision, as a snap judgement could end up costing you dearly in the long run. Whether you’re after a new car, those much-needed home improvements or that dream holiday you’ve promised yourself, loans can help. The most important decision to make when choosing a loan is between secured and unsecured borrowing and you should evaluate your personal circumstances honestly to find out which route is best suited to your needs. If you’re unsure about which loan type is most appropriate for you, it’s a good idea to contact a lender like 1st Stop to discuss your options.
What’s the Difference?
A secured loan is a loan held against your property, and this means that you present a smaller risk to lenders. They know that if you find yourself unable to keep up with repayments, they can regain their investment in the form of your property. It’s very important to be mindful of the fact that failing to repay a secured loan can result in your home being repossessed. Unsecured loans do not involve your property, and this means that interest rates are usually higher, and lenders are more interested in the state of your credit history.
Which Loan is Right For Me?
Secured loans are the ideal choice for those who wish to borrow larger sums of up to £500,000 and who have a poor credit history. Some people believe that their only option is to take out a payday loan when their credit history is bad, but this is not the case. You may be turned down for an unsecured loan due to your credit rating, but it doesn’t mean that you should be forced to pay the extortionate interest rates that accompany the majority of payday loans. A secured loan is often taken out over a longer period of time, so you should factor in the number of years you wish to be making repayments over. If you’re looking to consolidate a number of current, high-interest loans, for example on credit cards, a secured loan can help simplify your debt. Secured loans are also recommended for those who have high early redemption charges on their current mortgages, have recently become self-employed or who cannot prove their income with either payslips or account balances.
Unsecured loans provide smaller amounts of money over shorter periods of time, and interest rates on these loans tend to remain fixed throughout the borrowing period, so that you can budget effectively. There is no risk of losing your property, and unsecured loans are generally the cheaper option due to shorter borrowing periods and lower rates of interest. They are usually a better choice for those with good credit histories who are interested in smaller, personal loans.