Written by: Benjienen Toledo
One of the things you’ll need to consider when buying a home is choosing the best home loan.
What’s the Difference Between Secured and Unsecured Loan?
A secured loan is one where the debt is linked to the borrower’s property while unsecured loans are available to would-be borrowers who have at least a fair credit score or also referred to as personal loan.
Is Secured Loan Suited for You?
Secured loans are most suited for extensive, one-off purchases or expenses such as when you buy your next home, plan for home improvements or flat renovations, debt consolidation or a new car.
What are the Pros of Secured Loans?
- Secured loans are available for much more significant amounts than personal loans
- As your property acts as security, it may be easier to qualify for
- The repayment periods may be longer
- Monthly repayment plan may be easier to manage because you can usually agree to make lower monthly repayments
What are the Cons of Secured Loans?
- Since a secured loan is linked to your property, you could risk losing your home. Thus, you need to keep up repayments on a secured loan
- Since you can agree to make lower monthly repayments, you’ll have to extend your borrowing term to do this – which means that you’ll pay back a more considerable amount overall the longer the term because the more interest you’ll have to repay in total
- Charges such as early repayment penalties could increase the cost of borrowing, so, you need to scrutinise the terms and conditions
To honestly compare loans, focus on the actual amount you will repay and over how long. Think carefully before securing other debts against your home and borrow only what you need.
Sources: Money Supermarket, Barclays
