Secured or unsecured are the two options available to most people, although by far and away most people arrange their personal loans on an unsecured basis.
Secured loans are - as the name suggests - arranged on the assumption that the borrower is going to put up some kind of surety to the lender.
Generally this is the borrower's property. This means that the lender has the right to take ownership of the asset if you fail to make the repayments that are due under your loan agreement.
While most of us would baulk at the prospect of putting our homes on the line, there are advantages to taking out a secured loan.
For example, the lender's risk of default is reduced, which usually means a lower interest rate or perhaps a longer repayment period.
One of the key differences between secured and unsecured loans is that it is usually possible to borrow far more by going down the secured route.
Lenders will consider much higher sums if they know they have a security over your property and it is possible to arrange up to £100,000 - but you'll typically need to put the deeds to your home on the table.
The amount borrowed is repaid monthly over an agreed term agreed at the outset, which will usually range between three years and twenty five years.
You may be charged a penalty if you repay your loan earlier than agreed, and you should check each lender's individual policy.
But the key issue here is that, when you see that bleak warning notice 'Your home is at risk if you fail to keep up with repayments', it really does mean that. Consider therefore the risk of losing the asset, were you to fall into arrears with the required repayments, against the advantage of paying slightly lower regular payments.
It will probably come as no surprise to learn that around 90 per cent of all loans arranged fall into the unsecured category.
