The Mortgage Finance Blog

Sometimes there is confusion about the differences between secured and unsecured (or personal) loans. Both types of loans have their place and their uses. The main benefits and differences are:

For small and relatively short-term loan, personal (unsecured) loans make perfect sense, providing an affordable source of credit. However for larger purchases the maximum repayment term, or the maximum loan size of £25,000 can cause an issue.

For instance, building an extension, could easily cost over £25,000 and even if it didn’t the repayments might not be affordable over a 10 year or shorter term. A secured loan can make perfect sense in these circumstances, where a large loan is required or the payments are to be spread over a long period of time to keep the costs down. In these circumstances a remortgage may also be appropriate, however depending on your current mortgage it may well work out cheaper to take the secured loan.

Your mortgage broker should be able to help you with the cost comparison between a secured loan and a remortgage which should include any early repayment charges, your current rate and the new rate and any fees involved in arranging the new mortgage. If you're interested in how much a secured loan would cost, why not have a look at our secured loan calculator.