Which is Better - a Secured Homeowner Loan vs an Unsecured Loan?
If you need to borrow money, unsecured loans and secured homeowner loans are two of the best ways to raise the cash that you need.
Secured homeowner loans allow you to borrow using the equity in your home. The lender takes a ‘charge’ over your property which means that your home is at risk if you fail to keep up repayments on your loan. You can typically borrow anywhere up to £50,000 and pay back the loan over a term of your choosing – often up to 25 years.
Unsecured loans have no such security. They are generally for smaller amounts than secured homeowner loans and are paid back over a shorter period of time. Whilst your home isn’t at risk if you fail to pay your unsecured loan, your credit rating could be damaged.
There are various reasons why you would consider a secured loan above an unsecured loan. For example, if you are self-employed or if you have a less than perfect credit rating, you may find that you have no choice but to opt for a secured loan. This is because unsecured lenders are increasingly choosy about who they lend to. You could find it hard to gain an approval for such a loan if you have poor credit or are unable to prove your self-employed income to the lender’s satisfaction.
Secured loans are also useful if you want to borrow a larger amount or if you want to pay back the loan over a longer period of time. You may also find that secured homeowner loan rates are lower than unsecured loan rates as the lender has your property as their security.
Unsecured loans tend to be more suitable if you want to borrow a smaller sum over a shorter period of time. As the lender does not take your property as security, you also benefit from the peace of mind of knowing that your home is not at risk if you are suddenly unable to make your loan repayments.