Finance Spirit

No one likes to borrow money. We don’t like borrowing money because we have to pay back interest which is simply money in the lender’s pocket. However, if you need money for a large purchase then consider very carefully what your options are and be aware of what kind of borrowing there is available. Secured loans are one option but as we shall see, come with added risk which could be catastrophic.

If you really can avoid taking out a secured loan – then do so. There is far more risk and more to lose and they are also known as ’second-charge mortgages’. Basically, you borrow money which is secured on a large asset that is in your name which is typically your house.

The major concern is just like with your main home mortgage, if you do not keep up with the monthly payment your home can be claimed back the lender. Your mortgage lender will be paid off first, followed by the second-charge lender.

Because secured loans are typically available for up to 25 years compared with an unsecured loan of around 10 years, the repayments will naturally be lower making them appear like an attractive option. It may seem like a great idea to consolidate your debts or to fund a large purchase such as a car or a big vacation, but ask yourself, is it really worth the risk? You could lose your home and all that you have work so hard to achieve if you cannot make the payments. In contrast, with an unsecured loan the worse that can happen if you default on payments is that you damage your credit rating.

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