If you are thinking about taking out a loan make sure you are considering it carefully and know what you are getting into. With any type of loan there are serious implications if you miss any repayments and find out you cannot afford to pay back to loan you agreed to.

To take out either of these loans you will have to have a good credit score so start by improving that if necessary.

Secured Loan

These are sometimes called Homeowner loans, second-charge mortgages or home loans.

If you take out a secured loan you will have to place a valuable asset as collateral, this is often property such as your house or a car depending on the value. This gives the lender security if you fault on your repayments.

If you cannot keep up with the repayments then the lender can sell you house or other valuable asset you placed as security.

When you apply for a secured loan you will receive the money quickly directly into your bank account. You will often have lower interest rates on a secured loan as you have given the lender security in the form of assets.

You can choose how long you have to pay back this loan and often giving yourself longer will be best as the monthly payments will be lower however the overall interest is then higher.

 

Personal Loan

For this loan you will not have to name any valuable assets however, you will be able to borrow less with a personal loan, usually up to £25,000.

If you miss a repayment or find out you cannot pay the lender back over time then you will face legal consequences.

If you do manage to meet the agreements then this could improve your credit score.

You can choose how long you have to pay back this loan and often giving yourself longer will be best as the monthly payments will be lower however the overall interest is then higher.

 

Taking out a loan is a serious financial decision and should not be made lightly, make sure you have all the information and are confident you will be able to pay back your loan in full.