Securing your future: How secured loans can help you achieve big financial goals

Working towards financial goals can sometimes feel like an uphill struggle. Life can throw unexpected and expensive surprises at the most inopportune moments which can put the best-planned budgets out of sync.

Secured loans are an option for large-scale goals which normal personal loans may struggle to finance. Here’s the lowdown on secured loans and why they may be right for you.

What are secured loans?

Secured loans are typically larger loans than other personal loans. Some lenders allow you to borrow up to £100,000 compared to personal loans which tend to have a cap of £25,000.

Unsecured loans don’t need any form of collateral whereas secured loans do. This is due to the large amount being borrowed as lenders need some security that you will pay it back in some way. Borrowers tend to offer up large-value items such as homes, cars or valuable jewellery.

Benefits of secured loans

Higher borrowing limits are often the main draw for people utilising secured loans. Being able to borrow more means that larger projects such as home renovations, paying for a dream wedding or even financing education can all be done much sooner than if you were to save.

Your credit score affects your borrowing prospects. Those with lower credit scores or with less of a credit history may find it easier to get a secured loan as banks will be more confident in your ability to pay it back.

Secured loan interest rates also tend to be lower than unsecured ones. This leaves you paying back less in the long run compared to if you took out multiple personal loans to cover the costs.

Responsible use of secured loans

As with all forms of loans, you need to make sure that it is the right decision for your situation. You need to take a look at your finances and ensure you are able to meet the monthly repayments and that you aren’t left struggling because of the additional costs.

Over-borrowing is also tempting with a secured loan. Just because the money is available to you doesn’t mean you should borrow it all. Borrowing more than you need and struggling to pay it back and mess up your credit score, affecting your future borrowing prospects.

Ultimately, if you get a secured loan and do not pay it back for whatever reason, you will lose whatever collateral you put up. In extreme cases, you could be left homeless or without transportation to work which can impact your whole life.

Finding the right loan for your needs

Before you sign on the dotted line, make sure you do your research about different lenders. There are some which are less scrupulous than others and may have hidden charges in the small print.

Read the small print before you commit too. Making sure you are aware of all clauses and conditions will allow you to make an informed decision.

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