Secured loans, also known as homeowner loans or second-charge mortgages, allow homeowners with an existing mortgage to borrow money using their property as security (also called 'collateral').
This type of personal loan typically allows borrowers to access larger sums of money, often being used for significant expenditures, like consolidating large debts or renovating property. As the loan is secured against the value of your property, it means that if you do not keep up with loan repayments, the lender may decide to sell your property in order to recover the borrowed funds.
Before making your decision, consider exploring the various types of secured loan:
Debt consolidation loans are designed to simplify your debt. They work by consolidating multiple debts into a single loan that you can manage with just one monthly payment, often with a lower rate. This type of loan is ideal for those looking to uncomplicate their repayments and reduce the total interest paid over time.
Get your quoteHomeowner loans, also known as home equity loans or second charge mortgages, allow you to borrow money against equity you've built up in your property. These loans are typically used for large expenses such as home improvements and major life events with the amount you can borrow being dependent on the equity available in your home.
Get your quoteCar finance loans, also know as logbook loans are specifically used for purchasing vehicles. This option is particularly useful for raising money by individuals who may not qualify for traditional auto loans. By leveraging home equity, borrowers can often secure more favourable interest rates and terms, making this a viable alternative for owning a new or used car outright.
Get your quoteBridging loans are a short-term lump sum, designed to cover immediate expenses while waiting for additional funds to become available. They are often used in property transactions to "bridge the gap" between purchasing a new property and selling an existing one. Bridging loans provide a quick influx of cash but typically come with higher interest rates due to their temporary nature.
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The difference between secured lending and an unsecured loan lies in the use of collateral:
Secured loans work by requiring an asset for collateral, providing security to the lender but increasing risk for the borrower. When secured borrowing, it's important to make payments on time and in full, to avoid losing your home.
An unsecured loan does not require a secured asset (collateral), making them riskier for lenders and usually requiring a better credit score from the borrower. Unsecured loans typically offer much less borrowing amounts.
Choosing a loan secured against your home is an important decision that requires careful consideration. Evaluate your ability to meet repayment terms over the entire loan period, taking into account that interest rates tend to fluctuate. Depending on how many other loans or commitments you have, be sure to explore all the available options, including personal loans.
Begin by looking into the secured loans available. Compare what banks, online lenders or secured loan providers are offering, taking particular interest in their rates, terms, and eligibility requirements to find the best fit for you.
Complete a secured loan quote form here. You'll be asked for details on yourself and your finances including employment history, income, expenses, and the purpose of the loan. The quote, includes a soft credit search that does not impact your credit score but allows advisors to check your eligibility for offers.
You'll have an advice call to discuss whether a secured loan is right for you. Your advisor will discuss your reasons for the loan and will do a basic affordability check.
Lenders will begin sending offers detailing the amount you are able to borrow, the interest rate, your repayments, and any fees. You should carefully review each offer to full understand the terms and costs.
Start the formal loan application if you decide to accept an offer. The lender will also perform a full credit check to assess your creditworthiness. This step is similar to the original mortgage application process and includes gathering your documents. The type of documents that may be needed:
This stage includes signing your agreement with the lender. Pay special attention to the interest rate, monthly repayments, introductory period, and any penalties associated with early repayment or default. Understanding these details is essential to ensure that you are fully aware of your commitments and don't risk losing your home. Completion is typically within 14days.
When submitting your application for a loan secured against your home, you'll need to provide proof to the lender. To help with the process, we've provided a checklist of documents you'll need to gather to prepare for your loan application.
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While paying off a loan early can be financially liberating, it often comes with penalties. Some companies may charge you an early repayment fee for doing so. These fees typically range from the cost of one to three months’ interest. Before you overpay, check with your lender whether a fee will apply and how much it will be.
The amount you can borrow with a secured loan depends on the value of the asset you're using as security. Lenders will typically not loan you over 90% of your property value (loan to value ratio). But it's based on factors like your income, credit score, if you have any other asset to use and if you can afford the repayments. It's best to compare the market to see how much you might be eligible for.
In order to be able to borrow or qualify for secured credit, borrowers must have accumulated equity in a property. Equity refers to the part of your house you own entirely. You can calculate how much equity you have by subtracting the amount you still owe on your mortgage from the current value of your home. The more equity you have, the more you can potentially borrow. In simple terms, higher equity means you own more of your home, which can help you get a bigger loan.
When you take out a secured loan, you agree to make regular monthly payments to cover the loan amount plus interest. The interest rate might be a fixed rate or variable, depending on the terms you choose. If you choose a longer repayment term, your monthly repayments will usually be lower, but you will pay more interest overall. A shorter repayment term will have higher monthly repayments, but you will pay back less interest in total. Successfully keeping up with your monthly repayments means you maintain ownership of your home, while failure to do so could lead to significant financial and personal loss.
All loans come with risks. For example, your credit score may decrease if you fail to make your repayments on time. However, defaulting on a secured loan allows the lender to take possession of the collateral - your home. Before this drastic step is taken, it’s often possible to negotiate terms with the lender if difficulties arise. A default is noted on your credit report, will affect your credit score and future lending opportunities often resulting in terms that have more interest.
For a secured loan, having a "good" credit score between 881 and 960 can help you get better interest rates, but it's not always required. Since the loan is backed by your home, lenders may be more flexible with credit scores. Generally, a higher score increases your chances of approval and getting favourable terms. It's a good idea to compare lenders, using one of our calculators to get an idea of their requirements.
We have a selection of second-charge lenders who offer loans if you have a bad credit history and if you make your payments on time, you can improve your credit score. Our lenders also accept CCJs and defaults, even if they’ve occurred in the last 12 months.
Yes, you can sell your house with a secured loan on it. The money from the sale would pay off your secured loan together with your first-charge mortgage. Typically, your conveyancing solicitor will handle this aspect and deal with the lender during the sale process.
We make secured loans easier with detailed guides that walk you through every step.
‘’Secured loans may be a good option if you need to borrow a large amount of money and have a home to use as collateral. They often come with lower interest rates, making them useful for things like debt consolidation or home improvements.”
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