A secured personal loan is money you borrow by providing security, you repay the loan over a fixed repayment term. You can read more about what they are and how they work in our guide below.
A secure loan, a homeowner loan or a second-charge mortgage - whatever name you know this loan by - it’s an effective way to access large sums of money for a relatively low interest rate. If this sounds too good to be true - you’re not wrong, there’s a catch! That catch is securing the loan with collateral. Lenders are less likely to turn you down for the money when you can offer up a valuable asset (such as a house or car) just in case you can’t make the repayments.
If you’re confident that you can afford the repayments - even on a variable interest rate - then a secured loan could be the financial solution you’ve been looking for!
Securing money against your mortgage is a popular route to access funds. According to The Bank of England, households borrowed an extra £3.9 billion secured against their homes in June 2018.
So whether you’re hoping to consolidate your debt, undertake a home renovation project or fund a wedding - read on to learn more about whether a secured loan is for you.
A secured loan, known as a ‘homeowner loan’, is a long-term loan solution borrowed against your assets, usually your home (hence the name!). To access the money, the equity of your property is taken into account as collateral against your repayments. It sounds scary, and it can be because if you fail to make repayments, your collateral can be claimed by the lender. You don’t always have to place your property as collateral; there are other lenders that allow the borrower to put their car as collateral; these loans are referred to as a ‘logbook loan’.
Secured Loan Definition: A secured loan is ‘secured’ with an asset, usually a house. This means, if you fail to make repayments, the lender can recoup the money lent to you. This can mean lower interest rates for you as the borrower.
Secured loans are less risky for the lender - this can mean lower interest rates for you, as the borrower. But a secured loan is riskier for you. You’re contending with losing your asset if you fail to make repayments.
There are two types of secured loans: fixed-rate secured loans and variable secured loans. Much like a mortgage, a fixed-rate means you’ll be paying the same amount in repayments and interest rates for a fixed period. After which, you will be charged the lender’s stand variable rate (SVR). Variable secured loan repayments and interest rates fluctuate based on the Bank of England base rate.
This is why you must take the time to compare secured loans; they can vary wildly.
A secured loan is much like any other loan in that you pay it back, with interest. To learn more about the application process, we’ve detailed the five steps below.
We have created an easy-to-use secured loan calculator to help you calculate the cost of the loan.
Before applying, you need to make sure you meet the lender's criteria which can be found on their website. Applications are made online and can include information such as personal details, income and expenditures.
The lender will check and verify your application to make sure the details are correct and that you can afford to pay back the loan. They will also perform a credit check on you. This decision is made quickly, although sometimes they may ask you to send in more documents.
If you are successfully approved, you will be presented with a loan agreement. The lender may offer you less than what you initially applied for. Please review this carefully and make sure you are happy before deciding to accept it or not.
If you accept the offer, you will receive the money directly into your chosen bank account.
Payments will be taken via monthly Direct Debit until the loan is paid in full.
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As with any loan, you must take the time to understand your options when searching for the best secured loan. With so many UK lenders to choose from, what you can afford should lead your decision.
If you’re wondering ‘what can I afford to borrow?’ You can quickly work out whether you can afford a loan by using our free loan calculator.
Secured loans can be used for many things from supporting a home improvement project to consolidating debt. If you feel as though you’re struggling with managing your debt, seek professional, free and 100% impartial advice from the Money Advice Service.
Our website is completely free for you to use. We act as a broker, and we solely exist to help you find the best loan deal possible.
Please note: the terms and conditions for each personal loan product are shared with you before you accept the loan offer; read these carefully and ensure you fully understand them. You will also receive all fees and applicable charges from the lender, so you can calculate whether the loan repayments in full are affordable and realistic.
Don’t forget! If you need impartial advice about debt and borrowing, visit the Money Advice Service.
If you’re looking for a secured personal loan alternative that doesn’t require putting your assets at risk, you could consider an unsecured personal loan. Although this loan option might mean you have to borrow a smaller amount of money, it is a good alternative if you do not wish to put your house up as collateral.
Another alternative could be to borrow money from friends or family members. Before you apply for a loan, please consider whether you need one.
There is a big difference between secured and unsecured loans. The main difference is a secured loan is riskier for the borrower but less risky for the lender. This means preferable interest rates but the risk you could lose your home or any other asset you put against the loan.
A secured loan means the lender can rest easy that one way or another the loan amount with being repaid. With an unsecured loan, the risks are much higher for the lender. An unsecured loan doesn’t require the borrower to put up any assets - the application decision is usually made on your credit history and whether you can realistically afford to repay the loan.
A secured loan is usually for long-term borrowing, for a larger sum of money. The best example of a secured loan is a mortgage - if you fail to make your mortgage payments, your house can be repossessed by the lender.
Learn more about unsecured personal loans here.
Secured loans can be a good option for you if you have a poor credit history. This is because, for the lender, there is less risk associated with lending you the money. With collateral secured against the loan, if you default on repayments for any reason, the lender can recoup the money through your collateral.
Secured loans are a safe form of borrowing money, but only if you are confident that you can make the required repayments and interest rates. If not, as we’ve mentioned already, you risk having your home repossessed or losing any other assets you’ve placed against the loan.
Please ensure you can afford the repayments, even on a variable interest rate. This is important, as interest rates can go up or down.
In short, yes you can get a secured loan if you have less than perfect credit. Circumstances can change, and what you did in the past may now be different. Secured lenders will consider all applications fairly.
Be aware that all credit applications will be credit checked and will show on your credit file whether you are approved or declined. The more loan applications you make will risk damaging your credit file even further.
Improve your credit score: If you have bad credit and you’re looking to apply for a loan it’s always a good idea to improve your credit file before you approach a lender. Increasing your credit score will help increase your chances of approval. You can check your credit file for free at Credit Karma.
This will depend on a few factors including your property’s equity (how much you own outright), your income, credit history and affordability. Securing a loan will give you access to large loan amounts. You can usually borrow from 2 years up to 30 years plus.
A secured loan is used for making large purchases. For example, you can use it to pay for wedding costs or improve your home with an extension or loft conversion. It can also be used for debt consolidation.
The process can take anywhere from a few weeks to a few months or more depending on the complexity of the application. Secured loans tend to take longer to process due to all the required paperwork and checks. The easiest way to speed up the process is to send all required paperwork to the lender as soon as possible.
APR means Annual Percentage Rate, and it’s used to calculate the interest and fees of a loan over a single year.
This will vary from person to person. Although lenders will have their assessment processes, the majority are likely to ask for documentation such as proof of assets, personal debts, income, ID and credit profile.
If you fail to make a repayment, you could be at risk of losing the asset you have used as security against the loan.
If you think you are going to miss a payment, we encourage you to talk to the lender as soon as possible. They will help you arrange an alternative repayment plan.
If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from The Money Advice Service, National Debtline or debt charity StepChange.
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Representative 97% APR (fixed)
Representative example: Borrow £1000 for 24 months at 24 equal instalments of £77.48. Total amount to repay £1,859.52. Interest £859.52. Annual interest rate 70% (fixed). APR rates range from 45.3% APR. to 1575% Max APR. Your APR rate will be based on your circumstances.
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