Welcome to our guide on secured loans, your ultimate resource for achieving financial security!
- What is a Secured Loan?
- How much can I borrow with a secured loan?
- What can I use this Loan Type for?
- Would I be eligible for a Secured Loan?
- How long does the loan take to process?
- Will my mortgage be affected?
- What are the benefits?
- What do I need to consider?
What is a secured loan?
Finance. There are plenty of options out there, but which one is right for you? To help you get a clearer idea of all the loan options available to you, we’re running through how secured loans work and whether or not they’re an option you can consider.
What is a secured loan?
A secured loan – also called a homeowner loan or a second-charge mortgage – is a loan that’s secured against an asset you own, usually your home.
This added level of security for the lender means that you can usually borrow much larger amounts and spread the repayments over much longer than you can with a personal loan. However, it also means that if you stop making your secured loan repayments, as a last resort, the lender could take your property to recover their costs.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
How much can I borrow with a secured loan?
Secured loans can be used to borrow amounts from £10,000 to £2,000,000. That said, the amount you will actually be able to borrow will depend on your personal circumstances. Factors that can impact how much you can borrow include:
- The amount of equity you have in your home
- Your credit score
- Your income
- The amount of debt you currently hold
Secured loans also come with much longer repayment terms than personal loans. Typically, you can spread the cost of your borrowing over 1 to 30 years, as opposed to the maximum of 7 years with personal loans.
What can I use this type of loan for?
Essentially, any legal purpose. Although, as these loans are typically for larger amounts, the most common uses are home improvements, debt consolidation, or a combination of the two.
Would I be eligible for a secured loan?
To be eligible for a secured loan, you’ll need to be a homeowner and over the age of 18. You’ll also need to have enough equity in your home to secure your loan against.
Secured loans could also be an option for you if you have a lower credit score. Just make sure that you can confidently keep up with the repayments before making this financial commitment.
How long does the loan take to process?
Generally, this type of loan can take around 10 days to complete. This is because of the additional paperwork involved in securing the loan against your property.
Here’s a quick run-through of the steps involved.
Step 1: Check your eligibility
To get started, you can initially check if you’d be eligible for a secured loan online. Our partner, Aro, allows you to quickly see if a secured loan is an option for you without affecting your credit score.
Step 2: Speak to an adviser
Think a secured loan is the right option for you? If so, you’ll need to have an advice call with a qualified adviser. Your adviser will look at your circumstances and the finance options available to you, and will let you know if a secured loan is an available option. If they can see that a secured loan wouldn’t benefit you, you won’t be able to proceed.
Step 3: Fill out the paperwork
If you’re happy to proceed with your loan, you’ll be assigned a Case Manager who will arrange for the paperwork to be sent to you to complete. Once it’s returned, they’ll package your loan application and send it to the lender.
Step 4: Receive your loan
If your application is approved, you’ll then receive your loan.
Will my mortgage be affected?
No, a secured loan does not affect your existing mortgage, and you won’t need to remortgage to take one out.
So, if you’re currently in a low-rate fixed-term deal, you can use the equity tied up in your home by borrowing against it and leaving your current mortgage deal alone, rather than remortgaging to release equity.
What are the benefits?
Secured loans do have their benefits. Here are a few of the reasons why people opt for this type of loan.
- You can often borrow larger amounts to cover big expenses
- You can spread the cost of your borrowing over a much longer amount of time to reduce your monthly repayments
- You can borrow against the equity tied up in your home without affecting your existing mortgage
- You may be able to access lower rates with a secured loan
- Making all your loan repayments on time could improve your credit score
What do I need to consider?
As with all types of borrowing, there are a few things you need to think about before taking on this financial commitment.
- Missed or late payments could negatively impact your credit score
- If you are unable to keep up with your repayments, the lender could repossess your home as a last resort to recover their costs
- Spreading your repayments out over a longer term could mean that you pay back more in interest overall
- If you own your property with someone else, such as a partner, the loan will need to be in both of your names
So, there you have it – our quick guide to secured loans. Think a secured loan might be right for you? You can quickly check your eligibility online now to work out your options.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Looking to do a bit more research? Check out our guides to loans, mortgages, credit cards and more.