What is a secured loan?

A secured loan is a way to unlock extra funds by using something valuable you own, usually your home, as security. Offering this kind of guarantee could enable you to borrow a larger amount, often over a longer term, than a standard unsecured loan.

As there’s less risk for the lender, you might also get a better interest rate than you can with an unsecured loan. But here’s the flip side: if you fall behind on repayments, the lender can make you sell your home or other relevant asset to repay them. So, while secured loans can be a good option for big projects like home improvements or consolidating debts, they do come with serious responsibility.

Planned carefully, a secured loan could be exactly what you need to tick off your financial goals. Just make sure you’ve budgeted properly and feel confident about keeping up with the monthly payments.

Are you eligible for a secured loan?

If you're a homeowner with a decent chunk of equity in your property or another asset worth securing a loan against, you might be eligible for a secured loan. Whether you’re approved, and how much you can borrow, depends on a few personal bits and bobs.

Lenders will look at your income, your credit score, and any other debts you’ve got on the go. The better your finances look on paper, the more options you’ll likely have. The good news? If your credit history isn’t the best but you’ve got equity in your home, you might still be able to get a secured homeowner loan.

Another key thing lenders check is your loan-to-value ratio, or LTV. That’s basically how much you’re looking to borrow compared to the value of your home. The more equity you have, the more comfortable lenders will be – which could boost the amount you’re able to borrow.

As with any mortgage or secured loan, your home or other assets may be repossessed if you do not keep up with repayments.

How do secured loans work?

When you apply for a secured loan, the lender will ask you to put forward something valuable – like your home – as collateral. This means the loan is 'secured' against that asset. If you keep up with repayments you won’t even notice that your property or other asset is tied to the agreement.

A mortgage is a type of secured loan, but it’s not the only one. Even some car loans can be secured too, for example, using your property or vehicle as security. If you already have a mortgage on your home, an additional secured loan with the home as security is also known as a second-charge mortgage. It means your existing mortgage lender is repaid first if the property is sold to cover the loan.

The stakes are higher with a secured loan than with an unsecured loan. If you start to miss repayments, the lender can begin legal proceedings to claim your home or other secured asset to recover the money owed. That’s obviously a last resort for everyone involved, but it is a risk. That’s why it’s so important to make sure the monthly repayments are affordable.

In short, secured loans can give you access to larger sums, but they aren’t suitable for everyone. Make sure you compare your options and think carefully before securing other debts against your home.

How much can I borrow with a secured loan?

Secured loans can offer you access to pretty chunky sums – potentially £100,000 or much more – depending on how much equity you have in your home. Equity is basically the bit of your property you own outright (not covered by a mortgage), and the more you’ve got, the more you could potentially borrow.

You may be able to select a longer repayment period than an unsecured personal loan, e.g. up to 20, 30 or 40 years to make the monthly payments more budget friendly. Do remember though, arranging a long-term loan could cost you more in interest overall.

Most lenders will also look at your loan-to-value (LTV) ratio when deciding how much you can borrow. This is a percentage that shows how much you’re borrowing compared to the value of your home. The lower the LTV, the better your chances of getting a bigger loan – and potentially on better terms too. It’s all about showing the lender that you’re a safe bet.

That said, it’s not just about your property, especially if your loan is secured against another valuable asset. Your income, existing debts and credit score all play a big part in how much a lender is comfortable offering you. If you’ve got a stable income and manageable outgoings, you’re more likely to be offered a larger loan.

Secured or unsecured loan – which one's right for you?

Not sure which option suits your situation? There are a few factors to consider that will help guide you. The best option really depends on how much you want to borrow, how your credit looks, and whether you’re happy using your home, car or other relevant asset as security. Here’s a quick guide to help you decide:

A secured loan could work well if:

  • You’re happy to use something valuable – like your home or car – as security.

  • Your credit score isn’t great and you need a lender to look past it.

  • You want to borrow a larger amount and spread the cost over a longer time – some secured loans go up to 40 years.

  • You’re confident you’ll make your repayments on time.

An unsecured loan might be better if:

  • You’d rather not put your home or other assets on the line.

  • You want fixed monthly repayments and a simple setup.

  • You’re borrowing a smaller amount – usually between £1,000 and £50,000 – over a shorter term.

Loan guides

Answering your questions about secured loans

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