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Published on August 1st, 2013 | by Pete


Secured loans: what are the pros and cons?

It can be hard to decide what kind of loan is right for your needs – especially as there are so many different types available. If you’ve been considering a secured loan, Ocean Finance is here to explain some of the advantages and disadvantages you might face. If you think a secured loan might be just what you’re looking for, you can compare Ocean Finance’s secured loan deals to see what deals are available right now.

But we’ll start off by explaining what a secured loan actually is – in case you don’t know. A secured loan is a loan that is ‘secured’ or ‘backed up’ against one of your assets. This is usually your home, but can be something else, like a car. The idea is that if you fall behind on your repayments, and you can’t come to an agreement with your lender, they could take your asset in order to repay what you owe. This wouldn’t happen as soon as you miss a payment – but it is a possibility if you fall seriously behind.

A mortgage is probably one of the most common secured loans, but that’s not usually what’s being referred to when people use the term ‘secured loans’. They’re usually talking about other loans secured against a house or other asset – on top of any existing mortgage.

Now we know what a secured loan is, let’s have a look at some of the pros and cons.


• They can be easier to get than other loans. As your loan will be backed up or ‘secured’ against something you own, lenders may be more willing to lend to you – even if your credit rating isn’t great. However, it’s worth bearing in mind that people with poorer credit ratings may well be offered higher interest rates on secured loans.
• Interest rates for secured loans can be lower than for unsecured ones. However, this isn’t always the case – so you should shop around to see what rates you could be offered.
• Secured loans can usually be paid back over quite a long period of time. That gives you more time, and lets you spread out (and therefore lower) your monthly repayments.

• If you don’t keep up with your repayments, you could lose the asset the loan is secured against. So, for example, you could lose your home. This is a big risk – and not one to be taken lightly. That’s why if you’re considering taking out a secured loan, you need to be confident you’ll be able to keep up with the repayments.
• You may end up paying quite a lot in interest – especially if you pay back your secured loan over a longer period of time.
• If your secured loan comes with a variable rate (as opposed to a fixed rate) your interest rate may change in the future. That means you could end up paying more than you thought.

Secured loans are right for some people, but not for others. Remember to look at a range of loan deals before you decide on one – so you know you’re getting the right deal for your needs.

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