There are many ways for individuals in the UK to borrow money through a personal loan, but some ways can end up being far more expensive then other methods. When people are looking for a new loan, one of the biggest considerations is to get the best rate on a cheap loan.

For a potential borrower who owns their own home, a secured loan is often one of the cheapest and most effective ways of borrowing money, particularly if the loan is for a large sum, or to be repaid over a longer time than an unsecured loan would be.

A secured loan can be used for almost any legal purpose, from major purchases, to home improvements or debt consolidation of more expensive unsecured loans and credit cards.

To qualify for a secured loan, an applicant must be a home owner and have a sufficient amount of equity in their home over and above their home owner loan or mortgage, as the secured loan will take a legal charge over the property, as security for the loan.

Someone with a less than perfect credit history is more likely to be accepted for a secured loan than they are for an unsecured loan, or other form of borrowing, as the security offered by the property reduces the risk for the loan company in the event of the loan defaulting.

Once again, due to the security being offered on a secured loan, the overall risk on the loan is deemed to be lower and therefore the interest rates charged are usually cheaper than other types of borrowing.

Anyone who takes out a secured loan must be aware, that because they have used their home as security for the loan, this could be repossessed by the lender if they fail to keep up with the loan repayments and fall into default on the loan.

Many people need to borrow money in the form of a loan at some time or other, but a new survey shows that rather than going to a bank for a personal loan, or using their overdraft facility, a large proportion of borrowers are receiving loans from their friends.

The survey, which was conducted by the Post Office, found that somewhere in the region of £7 billion was offered as loans between friends within the last twelve months and more than a quarter of all adults in the UK have provided loans to their friends within the last twelve months, with an average value of £133.

Whilst this is a commendable attitude and most of us would expect friends to look after each other in this way, the survey also found that of those people who made loans to friends, around one in five of them could not actually afford to give the loan in the first place.

Furthermore, a similar number of people can not actually remember exactly how much they have leant to their friends, although 10 per cent of lenders say that they are not bothered about ever having the loan repaid…wouldn’t it be nice if high street banks took this attitude!

Although people have been quite happy to borrow a total of £7 billion from their friends over the course of the last year, tough economic conditions for many mean that twelve months on there is still an outstanding loan debt of around £3 billion.

Doug Strachan of the Post Office said “Understandably, millions of households across the UK have needed to tighten their purse strings as the recession has taken its toll and with money hard to come by from many lenders, people can be thankful that they have such good friends they can rely on.”

“However, our survey did reveal that one in five people are lending more than they can afford, so the Post Office is urging people to make sure they don’t put themselves, or their household, into financial difficulty when helping others.”

It is true to say that consumers living in the UK have generally become a nation of borrowers over the course of recent years, with the level of personal debt through personal loans, credit cards, store cards and other credit agreements growing at an alarming rate.

But it now seems that people are not as concerned about their personal loans and other debts as they used to be and there is no longer the stigma connected with being short of money or burdened with loans or credit card debts that there once was.

Mark Sands, head of bankruptcy at RSM Tenon, commented that the majority of people with heavy loan and credit card debts used to feel embarrassed or ashamed of their predicament, even if their current account ran out of funds before the end of the month, but this situation has changed in recent times.

One theory is that, due to the fact that so many individuals are now so heavily in debt with their personal loans and cards, this situation has become accepted as being quite normal and is therefore no longer an embarrassment, because everybody else has got just the same problems.

Mr Sands, who has worked in the bankruptcy sector for many years, commented that people were now quite happy to consider an IVA or bankruptcy as a way of getting out of their loan debts, whereas years ago this course of action would have been unthinkable for many people.

Commenting on the changing attitudes, Mr Sands said “The stigma of bankruptcy is massively reduced from anything I saw when I started in this career 25 years ago. However, many people now realise that they can successfully escape their debt by filing for bankruptcy, looking into an IVA, or opting for a Debt Relief Order.”

Most people living in the UK will, at some time or another, need to make a large purchase and will have to take out some kind of personal loan in order to do so. But with the large choice of different types of personal loan and many different loan providers all competing for the same business, it can be confusing for anyone looking for a cheap loan.

So if you’re bewildered by the vast array of personal loans on offer, what should you be looking for, or more to the point, what should you be trying to avoid?

The first thing is to find a loan with a low interest rate. The best way to compare cheap loans is to look at the APR (Annual Percentage Rate) as this will give the true cost of the loan and is a like for like comparison between different personal loans.

Many doorstep lenders will offer relatively small loans with a minimum amount of paperwork and fuss, but these usually work out to be extremely expensive ways to borrow money and should be avoided wherever possible.

If your credit rating is that poor that you are forced to turn to an unregulated loan company, you are probably better off not taking the loan at all and simply doing without whatever the loan was intended for!

It is important to read the small print on a loan agreement, as this will highlight any additional charges or things such as early redemption penalties, which could be a major problem if the loan is to be repaid early, or overpayments are to be made.

Finally, take your time looking for a new loan. By shopping around the loan marketplace, comparing different loans and checking all the small print, it is still possible to get a cheap loan to suit your particular needs and circumstances.

As we start to see further signs of economic recovery in the UK and in particular within the loan industry, one specialised loan company has just announced an expansion of its secured loan options for borrowers.

The specialist lender Tiuta has announced that it has received new funding worth around £300 million from Connaught Asset Management, via their income fund series 2.

Tiuta has already been making significant developments in the secured loan industry and this new open ended funding stream will allow the loan company to expand its lending operations even further.

Tiuta only offers loans exclusively through the financial intermediary and loan broker markets and currently specialises in the secured loan market, which includes buy to let loans, commercial loans and bridging loans, as well as the more traditional secured loans.

The new range of loan products will still follow Tiuta’s strict lending criteria and each loan will be sourced, underwritten and managed by the lender. Whilst many secured loans are available over a long term, in many cases up to 25 years, Tiuta will largely be focussing on short to medium term loans of up to 5 year terms.

George Patellis of Tiuta loans commented on the new funding, he said “Although this is one of a number of funding lines that Tiuta is fortunate to have, the sheer weight of backing of Connaught Asset Management illustrates just how determined we are to really make a mark in the specialised lending arena.”

“Of course, bridging finance still stands at the heart of the Tiuta proposition but there remains a large propensity to grow and really challenge across the whole of the specialist arena and secure our standing as a leading short to medium term lender.”