Secured Borrowing

Types of Loans

There are two types of loans – secured and unsecured. The type you apply for often depends on the sum you want to borrow and why you need it.

Secured Borrowing 

Secured Borrowing is when the lender has a legal charge over your home or a property you own, so that if you default on repayments, they can possess that property and sell it to get their money back.

Consolidated Loans

A consolidation loan is a type of secured loan. It allows you to convert one or a number of unsecured loans – e.g. credit card debts, overdrafts or bank loans – into one loan secured against your property. You should think carefully before taking out a consolidated loan.

Consolidated loans can be helpful for some people because it may allow them to make a lower repayment every month than they had done previously on their unsecured debts.

It is also less confusing to manage one repayment per month rather multiple repayments made on unsecured debts.

However, although the repayments may be lower per month, repayments will probably have to be made over a longer period of time. This means that you will almost certainly end up paying more on your consolidated loan than on your unsecured debts. Because a consolidated loan is usually secured against your property you risk losing your home if you do not keep up with your repayments. In contrast, if you do not keep up repayments on unsecured debts the penalties are potentially less severe.

Before taking out a consolidated loan: