Unsecured vs Secured Loan?

Written by David Beard on September 17, 2013

Updated February 13, 2022

Secured vs unecured loans

If you have been researching different types of loans in the hope to find out which is more suitable for you then this may help. Listed below are some of the standard features associated with each type of loan.


The features of a unsecured (personal loan)

  • Unsecured loans are given generally up to a maximum of £25,000 or in some cases larger.
  • Loans usually payable up to a maximum of 7 years or 10 years in some cases.
  • Loans are usually available from main stream lenders. For example The RBS, Nationwide, Tesco etc.
  • The APR (annual percentage rate) is fixed. This means your repayments and the interest amount you pay will remain the same throughout the term of the loan.
  • No security is required and available to those who don’t own their own home.
  • Minimum age requirements are from 18 years plus.
  • Lenders criteria will generally be based upon employment, salary, your current debts and your ability to repay the loan amount.


The features of a secured loan (Homeowner loan)

  • Loans can be anywhere up to £1,000,000 and beyond and depends upon many other factors such as the lenders criteria, the value of the security (the property) and the affordability for the borrower to repay the loan.
  • Loans are payable over a maximum period of 35 years.
  • Payable interest only or with capital repayment depending on the lenders own criteria.
  • The APR (annual percentage rate) is variable and linked to the Bank of England base rate. This means that your interest repayments could go up or down.
  • The loans are secured and you must have a property with sufficient equity to secure the loan against.
  • Minimum age requirement of 21 years plus.
  • Lenders criteria will be dependent upon LTV (loan to value) equity within your home and your affordability to repay the loan. Some lenders offer secured loans up to 95% LTV

In Summary

Secured loans are generally more suitable for those who need larger loans and have enough equity within their home to act as security. Secured loans can also be a solution for those with a blemished credit rating and are unable to obtain an unsecured loan via the main stream lenders. Most secured loans are not available direct from the lender and will normally be arranged via a secured loan broker.

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