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A Secured Loan is a loan where an asset, usually a flat or house, is put up by the borrower as collateral against the loan. This means that if the borrowers fail to make repayments on their secured loan, they may be liable to lose their property. So although these loans are actually easier to obtain and you are likely to borrow a larger amount of money than an unsecured loan, they carry a significant risk.
An Unsecured Loan, otherwise known as a Personal Loan, is a loan which is lent to a borrower without the individual having to put up a significant asset such as a property as collateral against the loan. Thus, despite the name, it is actually a safer loan for the borrower, although it is less easy to obtain and usually paid back over a shorter period than a Secured Loan. Generally Personal Loans are approved on the basis of the borrower’s credit rating.
Often managing a large number of different debts to different lenders and all at different rates can be hard to keep track of. Credit Cards, various loans and personal debts all incur different interest rates, amounts and payment dates, and you may be paying some high rates on some of these debts. Consolidation Loans help many thousands of people manage their money better by grouping together these existing debts, and reducing their monthly payments. So by getting a Consolidation Loan, the individual may be able to pay back existing debts and is then left with one low interest monthly payment to make.
It sometimes may be worth considering re-mortgaging in some cases to pay off some loans, although it is sensible to seek advice on this route.
*Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or other debt secured against it.
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