What are secured loans?

A secured loan is any loan that requires the borrower to provide the lender with some form of security. In the case of secured loans the security will be the borrower’s property, regardless of whether it is mortgaged or owned outright. Loans secured against property that is already mortgaged are known as second charges, whereas loans secured against a property owned outright with no existing mortgage in place are known as first charges. See below for a quick guide to secured loans.

How much can I borrow and over what term?

Secured home-owner loans are available in varying amounts and for many different purposes, including debt consolidation. The amount available usually ranges from £3,000 to £50,000 although some lenders will consider lending up to £100,000. The amount borrowed is repaid monthly over a term agreed at the outset, which will usually range between three years and twenty five years. You may be charged a penalty if you repay your loan earlier than agreed and you should check each lender’s individual policy with regards to this.

How do I get charged?

Lenders charge interest on the amount you borrow, which is referred to as the Annual Percentage Rate (A.P.R). The amount you can borrow, the term available and the A.P.R will all depend upon the equity you have in your property, the lender's view of your ability to repay the loan and your personal circumstances, for example any adverse credit. Subject to your circumstances, you may be able to borrow up to 100% of the property value. The A.P.Rs quoted by the lender will usually be typical rates and these act as a guide only as the exact rate offered will be on an individual basis. As a general rule, it is advisable to compare the A.P.Rs of different loans, as this is a good way to determine how competitive they are.

Whats the difference between an unsecured loan?

Generally, secured loans are much easier to obtain than unsecured loans. This is because the lender has the added benefit of security, which provides protection in the event of a customer's inability to repay. This also means that persons who are self-employed, have recently changed jobs or who have adverse credit can take out a loan.

The Financial Services Authority does not regulate secured loans.

Related Links

- Unsecured Loans
- Debt Consolidation