The cost of​ borrowing money in​ the​ UK is​ at​ its lowest level for some years .​
Interest rates as​ set by the​ Bank of​ England have stabilised at​ a​ low lending rate,​ enabling consumers to​ take out loans and credit agreements that are altogether very affordable .​
In fact,​ despite personal debt reaching record levels,​ there is​ a​ growing feeling right across the​ country that people are becoming more comfortable with the​ level of​ debt they are carrying .​
With loans being made increasingly more accessible via the​ Internet and specialist loan companies more willing to​ consider applications from people with a​ bad credit history,​ now is​ the​ time to​ borrow money for those house improvements or​ that new car .​
But,​ given the​ variety of​ loans available,​ how do you​ go about choosing the​ right type of​ loan for your needs?
Loan options
What type of​ loan you​ choose rather depends on​ what you​ want to​ do with the​ money .​
There are loans configured by lenders for a​ wide range of​ purposes these days .​
So whether you​ want to​ buy a​ new kitchen appliance,​ finance the​ purchase of​ a​ motorcycle or​ buy a​ holiday home you​ can be sure that they'll be a​ loan designed specifically to​ fund it .​
Regardless of​ the​ type of​ loan you​ are offered you'll find that all loans are broadly separated into two categories - unsecured loans and secured loans .​
Unsecured loans provide consumers with the​ option to​ borrow money up to​ a​ certain limit - typically £25,​000 - without formally committing any type of​ collateral to​ be used against the​ loan .​
a​ secured loan on​ the​ other hand requires collateral to​ be secured against the​ sum borrowed,​ and can be used to​ borrow anything upwards of​ £25,​000 .​
Why is​ collateral required for secured loans?
The definition of​ a​ secured loan is​ that the​ amount lent is​ done so on​ the​ promise that should the​ borrower default on​ payments the​ lender gains legal control over the​ collateral on​ which the​ loan is​ secured in​ order to​ recover the​ funds lost .​
If you​ wanted to​ borrow £100,​000 for instance then the​ loans company would require something belonging to​ the​ owner that has a​ minimum resale value of​ £100,​000 to​ be used as​ collateral .​
For most people this would be their home or​ the​ equity in​ their home if​ the​ loan is​ a​ second mortgage or​ if​ the​ loans are additional to​ a​ first mortgage .​
Therefore,​ the​ only real limit to​ how much you​ can borrow on​ a​ secured loan is​ the​ amount of​ collateral you​ can put forward to​ the​ lender .​
In the​ event that you​ default on​ repayments on​ a​ secured loan the​ lender will assume legal title to​ your collateral and put it​ up for sale .​
Lenders of​ course will only want to​ reclaim the​ money owed to​ them,​ regardless of​ the​ true market value of​ the​ collateral .​
It is​ for this reason that high value items such as​ homes and motor vehicles can be found at​ discounted prices in​ liquidation auctions.

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