Types of loan
Secured Loans
As the name implies, these are loans that are 'secured' on your home. They are only available to people who own, or have a mortgage on, their home and who have enough equity in the property to secure against the amount they want to borrow. In taking a secured loan, you are agreeing your home can be used as security against the debt and could be taken as full or part repayment of the debt if you were unable to make the agreed payments. In straightforward terms, if you miss payments and slip into arrears, your home could be repossessed.
This option won't be available to everyone who owns, or has a mortgage on their home, as the lender will need to be sure that there is enough equity in the property to cover the debt in the event of non-payment.
Some lenders may give a better interest rate on a secured loan, especially if you are looking at borrowing more than £15,000 but you should compare all types of loan from a range of lenders before taking one, and think carefully about the risk of losing your home if you were unable to pay for any reason.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Unsecured, or personal loans
These types of loan are widely available from a choice of lenders and are most commonly for between £1,000 and £25,000. They are not 'secured' against your home, and therefore could be suitable for a wider range of people and circumstances. The amount of interest you will pay depends on the length of time you want to spread the repayments over, the amount you're borrowing, and can sometimes be affected by your credit score or financial history.
Student loans
Student loans are offered by the Government to full-time students, to help with the cost of higher education. For more information, please visit direct.gov.uk