Secured loan decisions

Taking out a secured loan is a big financial decision. Here we look at the considerations you need to make when borrowing money.

First of all, ask yourself if you really do need to borrow all this money? No matter how you do it you will pay some interest rates.

For example, if you want a newer car as all your friends have got newer cars but there is nothing wrong with your old one, do you really want the weight of the debt around your neck? If the answer is ‘Yes, I still want a loan’, then read on. If ‘no’ well done, you go to the top of the class and can have the rest of the day off!

So you still want to borrow money. Have you thought about an alternative to taking out a loan?

For example, if you have enough money in your savings, why not dip in to them? The money you would have earned in interest on your savings will still be in the positive against the money you would have paid out in interest on a loan, as loan rates are higher than savings rates.

However, do make sure you do still have some savings set aside - preferably in a tax-free account such as a cash ISA - where you cannot easily ‘touch’ the money.

You could also look at borrowing against your home, by extending your mortgage. The rate of interest on mortgages tend to be lower than those offered on secured loans, so it can be a cheap way to borrow money.

However, be aware that if you do not keep up these extra additional payments every month, you could lose your home.