If you’re in the market for a personal loan, there are two major types of loan products you should know about. One is called secured loans because these loan offers require a security to be approved and another is referred to as unsecured loans, which is basically the opposite of secured loans. Both types have their sets of advantages and disadvantages. How do you know which type is best for you? Keep reading for a quick comparison of the two loan types.
As mentioned, secured loans are secured against an asset, for instance, your home, car and other types of assets such as stocks, bonds and even savings account. The lender will hold the title, logbook document or deed of the asset until you can fully repay the loan.
One of the best advantages of secured loans is the larger loan amount. Since there’s security involved, your lender can lend you more money. Even if you default on the loan, the risks are little to none for the lenders. As per the credit agreement, the lender can repossess your asset and sell it to cover for your liabilities.
Some of the most common secured loans available in the UK include mortgage loans, home equity line of credit, auto loans and logbook loans among others. To qualify for the loan, you must be of legal age, a UK resident and obviously, you must have the asset to use for collateral.
If you don’t have any asset to use for collateral, this is where unsecured loans come handy. Unsecured loans are more accessible and easier to get approved for. It’s also fast hence perfect for immediate financial needs. With unsecured loans, you only need to meet basic requirements and there’s no collateral to worry about. On the downside, the loan amounts are small and limited. In most cases, this type of loans may also come with high interest rates because of the high risks lenders have to face when lending you money.
Some of the most common unsecured loans available in the UK include payday loans, credit cards, personal signature loans and personal lines of credit. These loan products are specifically offered for people with bad credit issues. Credit checks are rarely required so approval is quick. Some lenders even guarantee same day approval. You can also receive the cash immediately making it an excellent loan option for a wide range of immediate personal needs.