Loans: Personal Vs. Secured

By: J Tillotson

If you need a lump sum fast, perhaps to pay for this years holiday, a wedding, car or home improvements, you may need a loan. If your credit score is good enough, getting a loan is relatively easy. But which loan do you go for? This guide quickly compares the two most common types, personal loans and secured loans, to help you decide which one is best for you.

Personal Loans


  • Can borrow from ?1000

  • Average maximum amount ?20,000

  • Short-term - usually between 1 and 5 years repayments

  • Potentially high interest rates

  • Usually only available for people with decent credit scores

  • Can be used to consolidate smaller existing debts



Secured loans

  • Can borrow larger amounts

  • Longer repayment terms - up to 30 years

  • Only available to homeowners

  • More accessible for people with poor credit ratings (if homeowners)

  • Loans are secured on your house

  • If you miss payments you could lose your home



In a nutshell, personal loans are useful for low-cost purchases and consolidation whereas secured loans are better used for larger things like home renovations, for example. The risks are greater with a secured loan as your house is used as equity; which means that if you default on payment your lender is legally entitled to recover their costs by seizing your home. Defaulting on personal loan repayments could lead to court action and black marks on your credit file.

If you are in any doubt as to whether you could afford the repayments on a loan, don't apply.

Personal Loans
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