What are the pros and cons of this type of loan?
Getting larger sums of money may not be possible any other way (without winning the lottery or completely re-mortgaging your home or even selling it). So if you need a major cash injection and there is no danger that you will fall short on the repayments then a secured loan can be a safe way to borrow the money.
Make sure you understand the risks though, as some lenders can act quickly if you miss payments as there is obviously a significant payoff involved. You’ll also need to think about whether a fixed or variable rate loan would be right for you. Fixed rate loans would give you the security of always knowing what you’ll pay each month, even if bank’s base rate rises.
However it could be more expensive than a variable rate loan. A variable rate loan could vary with the bank’s base rate (depending on the T&Cs) and maybe cheaper initially, but could turn out more expensive over the longer term or vice versa. What suits you best will depend on your personal needs.
The arrangement fees and other associated charges can also be high with a secured loan, so make sure you fully understand every charge. Look at the total amount repayable as well as the headline APR. Also, make sure you have read the fine print, understand the missed payment terms, just in case the worst happens. Lastly make sure you’ve compared your options using our secured loans comparison service and compared the different offers available, so you can find the right offer for you.