A Guide to secured personal loans

Lenders are finding new ways of soliciting loans to the general public. Marketing communications containing the words “Personal Loan” is a phrase often used. So what does this actually mean? In general terms most personal loans are regarded as unsecured i.e. no fixed assets are required to apply.

The borrowing amounts are generally smaller than secured loans and are sometimes used to buy luxury items such as holidays, cars, boats or for home improvements or even debt consolidation. The loan company or broker will assess an application on its merits in line with its lending policy. This usually means the prospective customer income, credit history, current outgoings, the amount required and most important the ability to repay the debt in full are assessed.

Some personal loans however are actually secured and are marketed by those companies who wish to lend amounts to those who maybe ineligible for an unsecured loans or consumers who are looking for the lowest Annual Percentage Rate (APR) interest rates. There is a perception that secured personal loan interest rates are lower because the lender is taking less of a risk. Always be aware that a secured loan is where a fixed asset such as a homeowner's property is used to guarantee the debt. Your home of course is at risk if you do not keep up repayments.