It can always be daunting when you speak to any professional in the finance industry and they start talking in their ‘language’, which results in a puzzled look across your face and a consistent, head-nod every now and then. So we’ve pulled together a set of common phrases and words that you will come across when looking for the right lending solution for you finances.
What is a Secured Loan?
This is also known as a ‘homeowner loan’. It’s where a loan is linked to your property. Therefore, you can only apply for this type of loan if you own or are buying a property. Additionally, you can borrow anything from £5,000 or more.
Nonetheless, the amount you can borrow + the duration of the loan + interest rate you’re offered, will all depend on your personal circumstances and the amount of ‘free’ equity in your property.
Value Of Your Home – Amount You Owe On Your Mortgage (if you have one) = Free Equity
- Larger loan amounts
- If your credit score is less-than-perfect, this might be the better decision for you rather than an unsecured loan as your property acts as security.
- Repayment period can be longer
- Fixed monthly payments
- Risk of losing your home, if you don’t keep on top of your repayments.
What is an Unsecured Loan?
This is a more generic loan, which anyone can apply for as long as they have a fair credit score. You do not have to be a homeowner to apply for this form of loan. You can borrow anything from £1000-£50,000.
- Widely available to more people
- Offer flexibility on your repayment timescale. Your average is 1-5 years.
- Some loans allow you to take a ‘payment holiday’ of 2-3 months if required.
- The best loan rates are for borrowers looking to make a repayment over 3-5 years. This means you’ll be paying a higher interest rate but a shorter borrowing term.
- The best deals are only available to those with high credit scores.