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: “Secured 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.
“Many 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.”
