Latest News

The differences between secured and unsecured loans?

02nd August 2018

Money. It’s nice to have. You can use it to go on holiday, pick up a perfect gift or indulge in a particularly great looking sandwich. However, sometimes there’s simply not enough, especially when it comes to large investments which require an upfront cost, or a great commitment. For many the easiest and most sensible solution is to take out a secured or unsecured loan – just what is a secured loan? What is an unsecured loan? Is one better than the other?


What is a secured loan?

Sometimes a secured loan is referred to as a ‘homeowners loan’, an indication of the requirements needed to take one out. This kind of loan is generally used to borrow an amount from £5,000 to £25,000, with the borrower’s property used as a security against the repayment. Needless to say, an applicant must already own a home (or other valuable property), or be in the process of buying one.


The amount that can be borrowed depends on personal circumstances and is largely dependent on the amount of free equity you have. Simply put, this is the difference between the value of your home and the amount owed on any mortgage. The lower the amount of free equity, the higher the amount you’re likely to be able to borrow.


What are the benefits of a secured loan?

Because property acts as a warranty, it generally allows a greater sum to be borrowed alongside lower interest rates. Likewise, the security means that secured loans are often easier to qualify for than other types, making them a good option for those rebuilding their credit score. Another benefit is that the repayment periods can be structured over a greater period of time, meaning repayments are often easier to manage in the long term.


What is an unsecured loan?

An unsecured loan is one that isn’t linked to a piece of collateral. Because of this, they are deemed riskier to the lender, often needing a good credit score to qualify. The sum borrowed is typically lower than that of a secured loan but they’re often a useful option for non-homeowners. Examples of unsecured loans include personal loans and student loans.


What are the benefits of unsecured loans?

Unsecured personal loans are generally available to the majority of people, making them an accessible means of getting funds. In addition to this, there is no risk of losing valuable property such as a home or car should you default on payments. Repayment can be arranged over a fixed period of time, with the maximum term generally lasting five years from the borrowing date.


It should be noted that these loans, especially smaller ones, can be expensive due to the higher interest charged compared to a secured loan. The best deals tend to be reserved for those with the best credit scores, so it’s worth ensuring yours is in the best shape possible before applying.


Is one better than the other?

Put simply, no. Both secured and unsecured loans can be useful depending on circumstance. However, should you have a home or other valuable property such as a car, secured loans tend to be a cheaper way of borrowing money, as well as enabling higher amounts to be loaned.


Are there alternatives?

Most types of loans fall under the category of secured or unsecured, from mortgages and car loans (secured) to the murky world of payday loans (unsecured). However, some kinds are more useful than others in certain scenarios. For example, using a 0% credit card can be cheaper and more flexible than taking out the equivalent small loan. These loans also take time to set up and there may be fees involved, so it’s worth carefully planning ahead before taking out any kind of loan.  


If you’re thinking of taking out a loan, or simply want to find out more information, get in touch with IMC, our friendly experts would be delighted to offer balanced and fair advice, no matter your circumstance.

Return to news page
Gold star Gold star Gold star Gold star Gold star
"We really like the people and services provided at IMC. We've been using them for 6 years and they are incredibly helpful and attentive. Really Great!"

Richard Curen , Nov 2018

Independent review from Google
Gold star Gold star Gold star Gold star Gold star
"Totally recommend
Excellent company to work with, Jacqueline Elliot has dealt with numerous mortgage reviews for us and always reminds us in plenty of time to renew and make the proceeds as easy as possible. Can not recommend highly enough."

LeighM-33 , Dec 2018

Independent review from Yell
Gold star Gold star Gold star Gold star Gold star
"Andrew Francis has just completed a re mortgage for me on a property I own in London. I live in Bournemouth so good communication is really important. Andrew and Jennie have been excellent during what was a protracted transaction due to the additional requirements from the lender and their appointed conveyance solicitors. Despite unhelpful delays by the lender , I felt IMC were always on hand to negotiate on my behalf and bring the transaction to as swift a close as possible. My cousin is an IFA who I'd naturally automatically go to for advice and products but he recommended I stick with IMC as he couldn't better the deal and lenders they had available. I normally begrudge paying a fee to an IFA when I know they will also be paid by the lender but to be fair in this case, they earnt it and some! Thanks guys. I'm now £600 pm better off for the next five years ! 👍🏻😁 Chris Amey."

Christopher Amey , Oct 2019

Independent review from Facebook
Gold star Gold star Gold star Gold star Gold star
"Our mortgage adviser Andrew Francis is brilliant. When we first met him we were first time buyers with very limited knowledge about the process of buying a first home in the UK. However, Andrew guided us through the process with his vast knowledge and professionalism. We had to recently re- mortgage our flat, Andrew got in touch with us well in advance he presented us with the best options for us and made the whole procedure painless. Of course, we were a lot more relaxed this time around, as we already knew that we are in good hands. Thank you for your help, Andrew!"

Vyara Panayotova , Feb 2020

Independent review from Google