What Documents Do You Need for a Mortgage if You Are Self-Employed?
Securing a mortgage when you’re self-employed comes with its own …
Updated: Jun 01, 2023
Secured loans have multiple uses and offer a flexible form of finance to cover large expenses. A secured loan works as a loan that is secured against an asset you possess, such as a property or a vehicle. Borrowers often take out secured loans for the following:
| Home purchase or real estate investments. | Funding for a wedding or other significant life events. |
| Vehicle purchase, including cars, motorcycles or boats. | Medical expenses or healthcare procedures. |
| Home renovations, repairs or improvements. | Travel expenses. |
| Debt consolidation to merge multiple high-interest debts. | Acquiring expensive assets, such as machinery or equipment. |
| Business expansion or startup capital. | Emergency situations or unexpected financial needs. |
| Financing education, such as college tuition or vocational training. | Covering legal expenses or court fees. |
Below we will outline further some of the primary uses for a secured loan and help you decide if it is the best option for your financial situation.
How Does A Secured Loan Work?
A secured loan works by requiring the borrower to provide collateral, such as a property or a vehicle, which serves as a form of security for the lender. If the borrower fails to repay the loan according to the agreed terms, the lender can seize the collateral to recover the outstanding amount, mitigating their risk and providing an incentive for the borrower to fulfill their repayment obligations.
As collatteral is provided, you are likely to be able to borrow a higher amount of loan and with a lower rate of interest than what would likely be offered to you via an unsecured loan offer. This is one of the reasons secured loans are advantageous over an unsecured loan. In addition, secured loans are often easier to obtain if you have bad credit or even no credit history. Having collateral gives assurance to the loan lender that they will make their money back, even if a borrower cannot meet their repayments.
Can I Use A Secured Loan to Make Home Improvements?
Yes, you can use a secured loan to make home improvements. If you are a homeowner or property owner and are looking to make some changes such as an extension or loft conversion, a secured loan is a good way to get access to the extra finance you might need.
Creating extra space in your property with extra bedrooms, a home office or making use of unused loft space can drastically increase the value of your home. You might be hoping to sell later down the line so taking out a secured loan to cover the renovation work could help to get the work done.
Urgent repairs might also be needed to cover unexpected damage to your home. The cost to sort roof repairs, flooding or other accidental damage might be more than you can afford with your other financial responsibilities, therefore a secured loan could assist to ease the worry.
Can I Use A Secured Loan to Consolidate My Debts?
Yes, you can use a secured loan for debt consolidation. If you have other debts to pay off, you could take out a secured loan to help improve your financial situation. By consolidating your debts, you can lower how much interest you are paying overall and lower your repayment requirements each month.
There is a risk involved with debt consolidation, and it is really important to understand the terms of your debt restructure if it involves unsecured debt. Think about speaking to a financial advisor to see if this is the best choice for your financial situation.
Can I Use A Secured Loan To Purchase An Additional Property?
Yes – you can use a secured loan to pruchase an additional property. If you are thinking of investing into further properties, such as a buy-to-let property or owning a second home, a secured loan could be the perfect option to secure some additional funds.
There are likely to be additional fees if you are using a secured loan to purchase a second property using your secured loan, therefore make sure you are confident in your ability to meet your repayments before agreeing to your loan.
Secured loans offer a range of benefits, including longer repayment terms and providing a loan option for borrowers with bad credit. Think about whether a secured loan is right for your financial situation and your intentions with the borrowed money.
If you are exploring the idea of taking out a loan, but are unsure whether you are borrowing money for the right reason, this guide can help to detail a few examples of ways a secured loan could benefit you.
Secured loans have a number of benefits compared to other forms of finance. Read our guide to secured loans to find out whether it is the best option for your borrowing needs.
How Much Can I Borrow With A Secured Loan?
The amount you can borrow with a secured loan is entirely dependent on the equity that you have in your property, your car or other personal assets.
It is very important to note that you are putting your asset at risk when you take out a secured loan. If you are unable to meet your repayments for your loan as agreed with your lender, your property could be repossessed.
