26 January 2007
A report from the Thrifty Scot has revealed that British consumers can experience a real benefit from choosing to take out a secured loan, rather than a personal one, provided that they do their homework first.
Many consumers opt for a personal loan because an unsecured debt poses less risk if they should fall into financial difficulty.
With secured debts, which are lent out against the value of the consumers' home, the main downside is that the family home will be at risk if a job loss or a serious injury prevents the debtor from making the repayments on time.
However, if consumers plan well enough in advance and ensure that they do not take out more than they can realistically afford, secured loan holders can experience considerable advantages over those who opt for an unsecured debt.
The Thrifty Scot identifies, for example, the fact that interest rates on repayments are usually significantly lower than those applied to an unsecured one.
"Obviously this is down to the fact that they cannot guarantee that they will get their money back on an unsecured loan, but on a secured loan most people would not risk not paying it back," the report states.
However, consumers should take some time to consider all their financial options, as repossessions are a very real possibility if debtors find they cannot keep up with repayments.
© 2008 Adfero Ltd
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