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What is a Secured Loan?

Secured loans can be an effective way to borrow money, with the option to borrow a large sum secured against your property, vehicle or a valuable asset that you own. This valuable asset is typically in the form of property (e.g a house or flat), and can help people borrow large sums of money for prolonged periods of time (3 to 30 years).

Proper Finance is a price comparison website and we help you to compare rates across the UK market for a range of financial products.

For secured loans, we are partnered with a panel of brokers who work with a number of FCA regulated second charge lenders.

We can help you apply for a secured loan today, whether you have bad credit or are self-employed and for a variety of purposes including:

  • To fund a wedding
  • For home improvements
  • To consolidate your debts
  • Start a business
  • Buy a car
  • Pay for a funeral
  • Pay for school fees or tuition
  • Help families get on the property ladder

The amount you will be able to borrow will depend on the value of your asset and your equity in it as well as other factors such as your income, credit score and affordability.

 

 

Types of Secured Loans and Their Uses

Secured loans can be used for personal or business purposes, with some people looking to pay for important purchases, consolidate debts or to grow their business, including:

  • Homeowner loans – Being a homeowner of a house or flat, you are able to use this asset to borrow money. This is typically known as a second charge loan or mortgage as it is the second priority that’s against your property after your mortgage (known as the ‘first charge’).
  • Bridging loans – used to ‘bridge’ the gap from the purchase to the sale of property. Bridging loans offer a short-term means of finance for borrowers to snap up time-sensitive deals. This could be household buying a house before selling their own or an investor buying a popular rental property within a short timeframe.
  • Second charge loans and second mortgages – This is where you borrow money against your home or flat but it is the second in priority after your main mortgage (known as the first charge). All payments are therefore taken second after your main mortgage and the amount you can borrow is a little less than your main mortgage because it is second in line.
  • Secured debt consolidation loans – this allows borrowers to put all of their existing financial debt (e.g., student debt, credit cards, loans) into one singular repayment schedule to simplify repayments and effectively ‘consolidate their debts.’
  • Equity release – helps homeowners to release money tied up in their property. This type of secured loan is intended specifically for those over 55 who have been paying off their mortgage for a substantial length of time and have built up sizeable equity to take out.

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What Are The Pros of Secured Loans Against Property?

  • Accepts all credit histories – By using your home as security, you are able to access finance such as £30,000, £50,000 or £100,000 even with fair or bad credit. Since property keeps its value or increases, this gives lenders the confidence to lend you large sums, whereas you may have been turned down elsewhere.
  • Fast turnaround – If you have all your documents ready to go and can get approved quickly, you can complete and receive funds within 2 to 4 weeks.
  • Low interest – For those with bad credit or less than perfect credit scores, they may get used to rates that exceed 20% or 30% APR, but secured loans use valuable collateral and this helps to bring the price down, with rates starting from 6.5% APR.
  • Choose fixed or variable rates – You have the choice to pay a fixed rate every month if you are someone who likes to budget – or you can opt for a variable rate if you think the market is going to change.
  • Borrow larger amounts – With certain loans such as personal loans, the limit may only be £20,000 or £50,000, but with secured loans, you could access as much as £200,000 or £500,00 depending on the value of your property, your income and credit score.

 

What Are The Cons of Loans Secured Against Property?

  • Your property is at risk – Using secured loans against a property will put your asset at risk if you are unable to keep up with repayments. Especially if this is your family home, you may be at risk of repossession if you do not make your payments long-term.
  • Broker fees are included – It is common for brokers to charge 1%-2% depending on the deal and their policy and this is something that you will need to factor in.
  • Exit or early fees may apply – If you wish to repay early or exit the agreement early, a fee may apply and this can be hefty, such as 1-3 month’s worth of interest.
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Can I Get a Secured Loan With Bad Credit?

Yes, you can get a secured loan even if you have a bad credit rating. In fact, secured loans are popular with those who have a poor credit history, since having the added security of your home means that the eligibility requirements by lenders are less strict – and the rates you can access can still be affordable.

Therefore, if you have an adverse credit rating you may still be eligible for this type of loan – provided you have a valuable asset to secure onto the loan.

It’s important to note that while you can get a secured loan with bad credit, you must ensure that you can afford repayments on this loan, as failure to pay back this loan can lead to repossession of your valuable asset – which in many cases is the borrower’s home.

 

How Much Will a Secured Loan Cost Me?

Borrow £30,000 over 5 years, monthly repayments of £683.62, total interest: £11,017.20 and total repayable: £41,017.20, based on representative APR 7.9%.

What Information Will I Need to Provide To Apply for a Secured Loan Online?

There are a number of different things you’ll need to provide when applying for a secured loan, including the following:

  • The estimated value of the property you are securing the loan against
  • The estimated equity you have in the property you’re securing the loan against
  • Your monthly income
  • Your contact details (e.g., email address and phone number)
  • How much you want to borrow
  • How long you want to borrow for
  • How much you owe in outstanding debts

At Proper Finance, we aim to match up your loan requirements with the best lender for you – and with our partners at Fluent Money Group having access to UK lenders that are FCA regulated, we are passionate about getting you the most competitive rates from across the market and completing as quickly as possible.

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What is the Eligibility Criteria For Secured Loans Online?

The eligibility criteria for a secured loan varies depending on the type of loan borrowers opt for. For example, those wanting to take out a homeowner loan will usually have to be over 18 years old, own a property and have a stable employment and monthly income so that they can repay their loan on time.

We are able to offer quotes for people with all different backgrounds and circumstances including those looking for loans for people with bad credit, CCJs and those who are self-employed.

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FAQs

What Types of Properties Can I Get a Secured Loan Against?

  • secured loans for residential property such as homes and flats
  • bungalows
  • chalets
  • converted barns
  • cottages
  • detached homes
  • farmhouses
  • guest houses
  • maisonettes
  • studio flats
  • terraces
  • townhouses

What LTVs Are Available for Secured Loans?

You can find lenders offering offer secured loans at 100% LTV or below:

  • 100% LTV
  • 90% LTV
  • 80% LTV
  • 70% LTV
  • 60% LTV
  • 50% LTV
  • 40% LTV
  • 30% LTV
  • 20% LTV
  • 10% LTV

What Happens if I Default On My Secured Loan?

If you start to miss payments on your loan and cannot keep up with them, the secured lender has the right to eventually repossess your home to cover the cost of funding you the loan (such as £50,000 or £100,000).

Repossessing property is always a last resort and the lender will usually contact you and try work out a more flexible arrangement or repayment structure.

But missing or delaying payments will negatively impact your credit score – and to also avoid losing your home, the best thing you can do is let the lender know as soon as you struggling to keep up with payments.

What Are the Risks That Come With Secured Loans?

One of the biggest risks that come with secured loans is the fact that the borrower’s valuable asset is used as collateral should they fail to keep up with repayments. In a lot of cases, this valuable asset is the borrower’s home, meaning if they fail to pay back the loan they risk losing their home or property.

However, repossession is typically a last resort, and if you are struggling to pay back the loan the lender will usually work with you to help figure out a more manageable way for you to repay.

What is The Difference Between an Unsecured and Secured Loan?

An unsecured loan does not have any collateral or security against it – you simply apply for a loan based on your income, employment and credit score and if you default, the lender can only charge you fees and send information to credit agencies to impact your credit score.

By comparison, a secured loan always has a legal charge against it and your eligibility and the amount you can borrow is based on the value of your asset or security such as your vehicle, house or flat.

Subsequently, a secured loan could help you borrow large sums if you have valuable security and provide opportunities for people with bad or poor credit scores. However, your assets can be at risk of repossession if your loan is not repaid and in arrears.

Can I Repay My Secured Loan Early?

Yes, you will typically have the option to repay your loan early and it is always important to check the terms of the lender since they often charge an early exit fee (which could be 1-3 month’s interest and is not a small amount).

Of course, you need to work out if repaying early is going to save you money in the long-term, which it might do.

In addition, if you are looking to move from the house that the loan is secured against, you will be expected to pay off the loan in full. This could be paid off through your own savings or arranged through a new mortgage deal.

Am I Allowed To Move House Once I Have a Secured Loan Open?

Yes, you can move house at any time, even when you have a secured loan open and this is very common, especially since some last for as long as 10, 20 or 30 years.

You will usually be required to clear all the debt and repay the secured loan in full and this can be done in various ways, such as through your savings or when you arrange a new mortgage for the next property you are moving into.

What Are The Alternatives To Secured Loans?

The closest alternative to a secured loan is a remortgage, where you essentially get a new mortgage but releasing some funds when doing so. This avoids having to take out a second charge loan or second mortgage and the more equity that you have in your home, the more you can potentially release.

Other options include unsecured loans such as personal loans which also allow you to borrow amounts such as £10,000 or £25,000 – but you will usually need to have a stable income and good credit score to access the best rates.