When you're in the market for a significant purchase, like a caravan or boat, or if you already own one, a lender may accept it as collateral for your loan. This arrangement often leads to a lower interest rate compared to unsecured loans because the lender faces reduced risk should you encounter difficulty repaying. Additionally, securing a loan with an asset can enhance your chances of loan approval.
Unsecured loans provide financial flexibility without the need for any collateral. You can freely utilise the funds as you see fit. However, it's crucial to note that unsecured loans typically come with higher interest rates. Lenders consider these loans riskier since there are no assets to serve as a safety net if you're unable to meet your repayment obligations.
Fixed Rate Loans
If you prefer the peace of mind that comes with predictable, unchanging loan payments throughout the loan's duration, a fixed-rate loan is the option for you. These loans maintain a consistent interest rate, allowing you to easily plan and budget for your repayments.
Variable Rate Loans
Alternatively, variable-rate loans are subject to interest rate fluctuations during the loan term. Interest rates may increase or decrease. Variable-rate loans can offer greater flexibility if you wish to expedite loan repayment since some lenders permit extra payments to be made towards the loan balance.