Home loan rates close in on unsecured deals

Homeowners in need of a larger cash advance can now choose from secured loan deals that are more competitive than the average unsecured loan rate, according to MoneyExpert.com.

New analysis* by the independent financial comparison website shows that the average APR on a £25,000 unsecured loan is around 7.15 per cent. However, borrowers with the option of securing the loan against their property can get rates as low as 5.9 per cent.

As unsecured rates are on the rise and with many homeowners looking to improve their home and consolidate debts rather than move house, MoneyExpert.com expects demand for secured loans to increase. Capital One currently offers a deal of 5.9 per cent on advances between £30,000 and £100,000 and Paragon Personal Finance will loan homeowners between £25,000 and £75,000 at a rate of 6.7 per cent.

However because secured loans are for longer periods borrowers will pay more interest and the loan will cost them more unless it is paid off early. A sum of £75,000 borrowed over 25 years at 5.9 per cent will cost as much as £140,000.

Sean Gardner, Chief Executive of MoneyExpert.com, said: ìSecured loans are becoming more attractive to homeowners who are seeking a competitive rate of interest and who are unable to get a competitive unsecured loan deal.

ìMany people looking to consolidate debts and who perhaps have a poor credit record will turn to secured loans. They may also have a low income or may need to borrow larger amounts over longer periods of time. Home loans can be a lifeline for the applicant, but they should be taken on with a degree of caution.”

Secured loans can also be a way to avoid the need to remortgage. People looking to raise significant sums, often for debt consolidation, may turn to their mortgage provider for help. However, MoneyExpert.com says that with interest rates on the rise many may be drawn to secured loans and a fixed rate rather than risking incurring a higher rate through their lender.

MoneyExpert.com says that even the best unsecured loan deals are no more competitive than the top secured loans. Best buy deals on both types of loan show applicants can get a rate of 5.9 per cent under the right circumstances. However it remains the case that those with good credit records have more options.

Compare unsecured loans

Compare secured loans


* MoneyExpert.com analysis of the Defaqto Aequos Database, 15.02.07

Leave a Reply

Your email address will not be published. Required fields are marked *