Secured loans have elevated risk over unsecured credit, but they could enable you to access a larger loan with more attractive repayment terms. Speak with a Moneysprite secured loan adviser today for help securing the secured loan you need.
What are secured loans?
A secure loan is when an asset is used as collateral within the credit agreement. When the individual takes out the loan, they will list an asset such as a vehicle, property, or home equity as security that they will repay the loan in full as agreed. If they do not, the lender can repossess the asset listed and sell it to recover the remaining loan balance.
By securing a loan with an asset, it makes it easier for the lender to recover the money in the event of payment defaults. Consequently, secured loans typically allow you to borrow more and have a lower representative APR than other credit options. However, the interest rate offered will be based on individual circumstances.
Secured loans vs unsecured loans
On the other hand, an unsecured loan does not list an asset as collateral within the credit agreement. This means the lender has no automatic right to seize an asset if you fail to repay. However, the lender can still take you to court if you have multiple defaults and legal action could extend to bailiffs repossessing goods or a charging order placed on a property.
Type of secured loans
There are many types of secured loans. The most obvious example is a mortgage, which is a loan to buy a property, but it is secured against the property itself. If mortgage payments are continually missed, the lender can repossess the property and sell it to pay off the mortgage for you.
Some other types of secured loan examples are:
- Secured personal loans
- Secured home improvement loans
- Home equity loans
- Lifetime mortgages
- Bridging loans
- Second charge mortgages