An unsecured personal loan is a straightforward contract: you borrow a lump sum, agree a fixed rate and term, and repay by monthly instalments. If you fall behind, the lender's escalation route is limited — a default, a possible County Court Judgment, and unsecured collection.
A secured loan (sometimes called a second charge mortgage) is registered against your property. Falling behind can ultimately lead to repossession, even if the debt is only a few thousand pounds. Missed payments on a secured loan are always a priority debt.
If you're weighing up a new loan, or juggling several, the size of the debt matters far less than whether it's secured. Consolidation into a secured loan often looks cheaper on paper but converts an unsecured problem into a home-at-risk problem.
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