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 Money
Page > Loans
> Secured Loan - UK Guide
 In a
nutshell
A loan that is secured against property
you own such as your home or your car.
Best
Loan for
People looking for reduced interest
rates.
Loan
Amounts
You can borrow anything between a few
hundred pounds up to £100,000+ for a secured loan - what you
actually borrow will depend on what you want, your lender's
loan amount rules and the type of loan you're taking out. It's
likely that any lender will look at your incomings and,
perhaps, your spending before they make a decision. Chances
are you won't be credit checked for a secured loan as you are
less of a risk with collateral behind you.
Loan
Period
Typical loan periods can run between 1-25
years depending on the amount you want to borrow, your lender
and the type of loan you choose.
Loan
Advantages
If you take out a secured loan then you
will agree to use your property as collateral. This makes you
less of a default risk to your lender and they therefore offer
much lower rates for secured loans than for unsecured
ones.
It is also easier to get a secured loan and this
option is more likely to be open to people with bad credit
histories as well - you may also find that you can borrow
higher sums more easily with this type of loan. Some people
may also make specific cost savings on fees by tying their
loan directly into their existing mortgage.
What to
look out for
The biggest drawback to a secured
loan is the fact that you are using your home to help you get
better rates. This is fine if you keep making your loan
repayments. But if something untoward happens or you find
yourself unable to manage financially, then your lender has
every right to take the property that you used as your
collateral. In the worst case scenario this can lead to the
repossession of your home. Many people take out payment
protection policies to protect their repayments - but this
will add to your overall costs. Many people run into problems
with secured loans because they borrow too much simply because
it's available to them. But, with many secured loans directly
linked into your mortgage, this can mean that you'll be paying
back more than you need over longer terms. This may keep your
monthly payments low but it will add up to higher costs in the
long run. Also, some people use a secured loan to consolidate
their debts which can be very risky - if you have financial
problems then you may well find that the extra payments for a
secured loan could prove to be too much. Again, this could
lead to you losing your home. You may also find that it takes
longer to arrange a secured loan - you will need to have your
property valued in most cases and the paperwork is more
complex. Some terms and conditions for secured loans aren't as
good as they could be. For example, you may want to make
higher payments every now and then because you have a little
spare cash - your lender may not let you do this. You may also
decide to repay your loan early - you can do this, but you
might be charged a high penalty fee to do so.
Alternatives
If the
benefits of a secured loan aren't vital to you and you're
worried about using your property as collateral, then you
could look at an unsecured option instead. Alternative
products include specialist equity release loans and flexible
loans.
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