A secured loan, sometimes known as a homeowner loan, is a type of loan in which you borrow against an asset you own. This asset could be your home or your car.
Secured loans are a good option if you need to borrow a lot of money. That’s because you can usually borrow more than you’d otherwise be able to. Lenders see you as a more reliable borrower if you have an asset against which a loan can be secured.
But you should think carefully before securing other debts against your home. If you don’t keep up the repayments on your secured loan, the lender could repossess your home to cover your debt.
How to get the best secured loan for you
To find the best secured loans in the UK, you need to understand what secured loan rates are based on. The rate you’re offered is linked to how much you want to borrow, how long you need to pay it back, and the value of your property. Lenders are interested in how much equity you have in your home.
The best way to get the right secured loan for you is to speak to a qualified broker. That’s because most lenders who offer secured loans in the UK don’t deal directly with the public; they only work with lenders. A lender will help you find the ideal homeowner loan for your needs.
Before you contact a secure loan broker...
If you’re going to talk to a broker about homeowner loans, you need to think about:
How much you need to borrow
What you’re going to spend it on
How much your property’s worth and what equity you have in it
The outstanding balance of your mortgage, or any other secured loans.
Your broker will use the information you share to help them find the right secured homeowner loan for you. You should check your credit record before you speak to them.You can also compare secured loans at the top of this page to get an idea of what cheap secured loans are available.
Check the cost of your secured loan
As with any loan, there are some costs associated with getting a secured homeowner loan. By speaking with a broker, you’ll be able to find best secured loan rates to make it as cost effective as possible.
Interest: You’ll pay interest to the lender on your secured loan. The interest rate you’re offered affects how much your monthly repayments are. It also affects how much interest you pay across the duration of your homeowner loan. By getting the best secured loan rates possible you’ll keep these costs down. Some secured homeowner loans have a fixed rate of interest, which means it stays the same throughout your term. Others have a variable rate, which means your interest can go up and down over the course of your loan.
Fees: At the start of your loan, you might be charged fees. These could include broker fees, legal fees or valuation fees (because it’s a loan secured by property).
Before you apply for your loan, look at the total cost of the homeowner loan so you fully understand what you’ll have to pay.
Homeowner loans are usually paid back over a period of one to 35 years.
Should I get a secured loan?
Secured loans can be a good idea if you need to pay for a big expense. This could be home improvements or perhaps funding a wedding.
As secured loans are directly linked to something you own – normally your home – it’s a big decision to take one out. If you couldn’t make the repayments on a loan secured by property, your home would be at risk. The lender could decide to repossess your home to cover the debt you owe.
Because of this, it’s a good idea to see if you have any options other than a secured loan against property.
Some homeowners might like to think about choosing equity release, rather than a secured loan. This means the lender pays you either a lump sum or a regular payment, in exchange for a percentage of your home. They get their money back when your home’s sold. It might also be a good idea to look into whether you could borrow what you need with an unsecured loan.
Alternatively you might be able to find a 0% purchase credit card that meets your needs.
Second charge mortgage
Second charge mortgages are a type of secured loan.
Instead of remortgaging or taking out a personal loan, a second charge mortgage lets you use the equity you have in your home as security. The equity in your home is the percentage of the home owned outright by you.
When you get a second charge mortgage you’ll have two mortgages: one on your home itself, and one on the equity in your home.Often it can be an alternative to remortgaging if you need to raise some cash.
It’s important that you fully understand the risks. As it’s a loan secured by property, you risk losing your home if you can’t make the repayments.
Secured loans for bad credit
If you're a homeowner with bad credit, you might still be able to get a secured loan.
You'll need a credit check, but a mortgage broker can assess your situation before you apply so it’s a good idea to talk to one. This means they’ll be able to recommend the best secured loans for you, and make sure you don’t go through more credit checks than you need to.
Here you can compare secured loans for bad credit.