Welcome to Loans 4

Perhaps the best known type of secured loan is a mortgage where the money you borrow to buy a property is secured against that property. This means that the lender effectively owns more of the property than you do at the start and it will generally be many years before the balance swings in you favour. The main consequence of this arrangement is that if you persistently default on the agreed repayments, you're likely to lose your home. The property will be repossessed and sold by the lender in order to recover the amount lent to you.

Secured loans also apply in other situations, particularly to finance the purchase of high value items such as cars and furniture. You'll generally find that a secured loan comes on better terms than an unsecured one simply because the lender has some security against bad debt and is therefore at less risk of losing money on the deal.

Secured loans are often known as homeowners' loans because, obviously, they're only available to homeowners. This type of loan does require that your home is put up as security and so, as for a mortgage, you risk losing your home if you fail to keep up the agreed repayments. One way to counter this is to take out payment protection insurance, which will make the payments for you in the event of illness or job loss. This does add to the overall cost of the loan but at least removes the worry of losing your home - assuming, of course, that you don't miss any insurance payments.

If you need to borrow money, a secured loan may be your only option. A bad credit history may mean that lenders aren't prepared to offer an unsecured loan and so you may have to commit some security before you're given the money. You may also be restricted to a secured loan if you're self-employed. No matter how long you've been doing this or how successful you are, lenders are put off by the lack of regular, assured income.