A secured loan is when a financial asset such as your property or car, is used as collateral in a Credit Agreement.
If you take out a secured loan and you fail to maintain your repayments, the lender has the right to Repossess the asset.
In most cases, the loan is secured against the item you are financing.
For example, if you take out a car finance agreement, the car is used to secure the loan.
However, if you’re unable to continue your monthly payments with a secured loan, the lender is entitled to seize the asset secured to pay off your outstanding debt.
Unsecured loans do not require an asset to be used as collateral. Typically, unsecured loans require a stronger Credit Profile as the lender cannot guarantee they will recover the debt if the customer fails to repay the loan.
One advantage of a secured loan, is they’re often more widely available to individuals with a less-than-perfect Credit Score.
This is because lenders know they can recover the debt by repossessing the asset if needed.
And often, secured loans enable you to borrow larger amounts. The trade-off is you risk losing the asset if you’re unable to repay the loan.
This could be your car or even your property, so maintaining your repayments is crucial.
Your asset can only be repossessed if you’re unable to repay your loan, so provided you maintain your monthly payments, there’s nothing to worry about.
But if your circumstances change and you find yourself struggling to make your repayments, you should contact your lender or a free Money Advice Service.
If your lender is aware of your situation, they can often work with you to find a solution.
This may involve suspending your repayments over a set period or setting up a revised payment plan.
Either way, most lenders will only look to repossess your asset as a very last resort.
Yes. Secured car loans are often available to a wide range of credit profiles, including those with bad credit.
Why not Check Your Eligibility today and receive an instant decision?
Check your eligibility today without affecting your credit score and receive an instant decision.