Unsecured loans are made without the security of an underlying asset. Generally speaking this means the lender is taking a bigger risk when making the loan because they’re unable to cease assets from the borrower in the event the borrow defaults on repayment.
Unsecured loans will generally require a very good credit history and the amount the lender is willing to lend may be reasonable small. Most people will struggle to borrow more than £10,000 pounds via an unsecured loan.
Secured loans are different to unsecured loans in that the lender has been provided security in the form of an asset which the lender can cease and then sell in order to recover any outstanding loan amount should the borrower default on paying the loan back.
This security will generally be provided as a second charge against the title of the borrower’s home or other real estate. This is an important consideration for anyone looking at a secured loan as it effectively means the lender may be able to force the sale of the borrower’s home in the case that they default on the loan.
Because the lender has this security they may be willing to lend far more to the borrower than they otherwise would with an unsecured loan. This could be hundreds of thousands of pounds so long as the borrower has enough equity in their property to cover the loan amount and they can prove material means to repay the loan.
Generally speaking a secured loan can be used for anything you like as it’s secured against your home rather than a purchase such as a car. There are many reasons people take our secured loans but some of the most popular include: