Secured unsecured UK loan

Secured unsecured UK loan is not generally the best way to fund a property purchase. However, it is a great source of cheaper finance compared to an unsecured loan which generally would have a shorter repayment period and would therefore be more expensive. A secured loan is now probably the only way to go for those requiring to draw down equity in their home rather than remortgage which may be more expensive during the credit crunch.

Both secured unsecured UK loans are governed under the Consumer Credit Act 1974 (NOT the Financial Services Authority). This effectively means that there is no recourse for misselling through the FSA. Unsecured loans, because of the higher risk of default, will carry a higher interest rate compared to secured loans which will have lower rates as the risk of default is decreased as the borrower stands to lose the property if payments are not maintained.

For either a secured unsecured UK loan, the greater the amount lent, the lower the rate of interest. This is generally because there are higher administration charges associated with smaller loans. With asset backed loans it's possible to borrow up to £100,000, whereas with unsecured the maximum is £25,000.

What's the best type of loan? The one that suits you the best! Always go for the amount that you need for the cheapest rate. Here are some things to watch for: online applications may be cheaper to offer as there are reduced administration costs; some lenders may offer repayment breaks or holidays from repayment; You will be credit scored - so if your credithistory is 'B-', then you may have to pay a higher rate; and lastly, a nasty trick suffered from personal experience is that if you take out insurance to protect yourself against accident, sickness and redundancy, then note that this insurance is generally not paid until you claim, and if you do claim the whole terms payments are added to your outstanding loan so that even when you come to pay this off early, you'll have to pay for the whole term's insurance and NOT on a pro rata basis.

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