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Which Is Best to Take Out, a Personal Loan (Signature Loan) or a Homeowner Secured Loan on Your Property?

If you need to borrow money, personal loans and homeowner secured loans are two of the best ways for you to get the cash you need. Both types of loan are very different and so you should understand how both work before you decide which is the best for you.

A personal loan (or a ‘signature loan’) can be for an amount of your choice and is typically taken over a shorter period of time (two to five years). However, larger loans can usually be taken over longer terms (between seven and ten years). The maximum you can borrow with a personal loan is about £25,000.

Secured homeowner loans allow you to typically borrow between £3,000 and £50,000, although some lenders will consider lending up to £100,000. The amount borrowed is repaid monthly over a term agreed at the outset, and you can generally take a secured homeowner loan over a longer term – even up to 25 years.

When deciding which is best to take out, you should consider which the most cost-effective route is for you. Your monthly payments on a personal loan are likely to be higher, but you may be able the repay the loan faster (saving you interest in the long term). However, you may prefer to spread the repayments over a longer period, keeping your initial costs low. In this case, a secured homeowner loan may be better.

You should also bear in mind that a homeowner loan is secured on your home. This means that if you fail to keep up your repayments on the loan, your home could be at risk. With a personal loan, the lender has no security for the loan, although non-payment will affect your credit rating and make it much more difficult for you to secure credit in the future.

All in all, the type of loan you decide to take will very much be determined by your own personal circumstances and whether you are prepared to offer your home to a lender as security.

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