Securing a loan for a large sum of money is not as straightforward as it used to be; banks and other lenders have stricter policies. But, given the right circumstances, there are still several options for you to investigate if you are a homeowner. With this in mind, we look at the differences between a mortgage and a secured loan.
A Secured Loan
The term secured loan refers to the borrower putting up an asset to secure the loan – in most cases, a property. Secured loans allow you to borrow larger amounts than other types, including personal loans. Typically, lenders will offer up to around £100,000 on a secured loan, whereas with a personal loan that is not guaranteed, the figure is more likely to be about £25,000. With a secured loan, there are several options to consider.
Also, the term on an unsecured loan is generally between 5 and 10 years. With a secured loan, this can be increased, and it is not uncommon for secured loans to be paid back over a 15 or 20-year period – making the monthly repayments lower, but meaning that the overall amount to be repaid is higher.
Interest rates on secured loans vary but are usually lower than those of an unsecured loan. The loan’s size, the term, and the equity the homeowner has accrued are considered when the lender calculates the repayment rate.
Homeowners often overlook secure loans, but the products from well-established providers like Ocean Finance can attract attractive options.
The differences between a secured loan and a second mortgage are relatively subtle. The only property can be used as collateral with a second mortgage or a mortgage extension. A second mortgage or an extension is connected with your existing mortgage, whereas a secured loan is an entirely separate entity.
In all other respects, the two types of loans are almost identical, and so deciding between the two is a matter of finding the best terms and conditions. It may help to use a comparison site to find the best deals or seek an independent financial advisor’s advice.
Provided you are confident that you can meet the criteria that will qualify you for more borrowing, the message is to shop around.