This short guide from loans Direct explains some of the common types of loans in the UK available to help you come up with a more educated decision. Secured loans use your belongings as a form of security on the loan you will get, typically a property, vehicle or any other similar. It allows the lender to sell the security directly if you cannot really pay for the loan. Secured loans are often much bigger compared to other types of loans which are why lenders required such loans to be tied to any type of asset like your house. A mortgage is a good example of secured loan since the lender has your home's security in the event that you cannot pay back the loan. Unsecured loans don't use your possessions as part of the application. You only borrow cash from a lender then pay this back over an agreed term. Unsecured loans are often meant for smaller amounts. These are not tied to any direct asset although your credit ration will often be considered and may also determine the specific amount that you can borrow. Unsecured personal loans are specifically helpful if you like to borrow a substantial amount for family holiday or home renovation over a certain period of time, and are also a more cost effective alternative to an overdraft or credit card. It is also likely that the interest rate will vary from one provider to another. If you will make a choice between these two, an unsecured loan might be more preferable since it will not put your possessions directly at risk in case something suddenly goes wrong.
