Secured loans, second-charge mortgages or 'homeowner loans' could be a handy way to borrow large amounts at a potentially lower rate, as the loan is secured against your property. We cover over 90% of the secured loans market.
Representative example: Assumed borrowing of £18,000 over 120 months, with a fixed borrowing rate of 6.5% per annum for the first 60 months, followed by 60 months at the lender’s standard variable borrowing rate of 4.95% above Bank of England Base Rate. There would be 60 monthly instalments of £227.38 followed by 60 instalments of £221.71. Total amount payable £26,945.40 comprised of; loan amount (£18,000); interest (£6,920.40); Broker fee (£1,530); Lender fee (£495). This would result in an overall cost of 9.1% APRC
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
For some loans a broker fee of up to 12.5% may be added to the cost of the loan.
Secured loans, sometimes known as homeowner loans, are borrowed against an asset you own - typically your home. When you apply for a secured loan, the lender will ask you to put up an asset as a security for the loan. This means that if you cannot repay the loan, the lender can sell the asset to recoup the loan.
Mortgages are a form of secured lending, typically used to purchase property. Secured loans, however, can be used for any purpose.
Typically, homeowner loans or secured loans are used for long term borrowing. They can have repayment periods of up to 40 years.
Whether a particular loan is right for you depends on your individual needs and financial circumstances, especially as to whether you will able to service the loan by making all repayments when they become due.
Secured loans are generally used to borrow larger sums of money. This can range from £35,000 and go up to around £100,000, though it is possible to borrow smaller amounts. This could be to fund a large expense like a wedding or making home improvements.
Secured loans are useful if you want to repay them over a long period of time. The longer term typically means that your monthly repayments will be much lower than a standard personal loan. The downside of a long term loan is that you may end up paying more in interest overall and your home is at risk if you fail to make the payments.
Banks and lenders are keen to offer secured loans and homeowner loans in part thanks to the lower risks to them. This opens a range of options for borrowers who can compare secured loans and find the best deal for them. You can also use our secured loan comparison tool and online loan calculator to see how much you can borrow.
As with most loans, the cost of the loan depends on the interest rate you're offered and any fees associated with the loan.
Interest: The interest rate you are offered will determine how much your monthly repayments will be. Secured loan rates will also affect how much you pay in interest overall over the term of the loan. This is why it's important to use a secure loan comparison tool to compare homeowner loans and find the best deals.
Some homeowner and secured loans have variable interest rates – meaning some months your repayments could cost more than others. If you are unsure about being able to afford higher repayments, or want the certainty of a fixed repayment plan, you should avoid this type of loan.
Fees: Some lenders may charge fees in relation to your loan. These can be arrangement fees, broker fees or, in the case of secured loans, valuation fees because the loan is secured by an asset. It's important to know the total cost of a loan so that you understand what you have repay.
Often when you compare secured loans, loan comparison websites or advertise an APR. This is a calculation of the cost of the cost of the loan, which includes the interest rate and any fees charged.
The ‘representative’ APR means that's the rate offered to at least 51% of a lender’s customers when taking out the personal loan.
Your personal circumstances will determine how much a lender will charge you for a loan. It's possible you might not get the 'representative' interest rate on offer when you compare secured loans on loan comparison sites. To get the best deal, or have access to a cheap loan, you'll need to have a good credit history with a high credit score. If you have defaulted on loans or credit card bills in the past, you may struggle to be approved for a secured or homeowner loan as your credit score may be lower.
Secured loans give borrowers access to a large amount of money at fairly short notice, which for many people is their main advantage.
Borrowers who use a secured or homeowner loan will also typically pay a lower interest rate than with a personal loan. Lenders will see you as less of a risk because the loan is secured against your home if you are unable to repay it.
You will need to repay the loan in instalments every month. If the interest on the loan is fixed you will repay a set amount each month. If the interest rate is variable, this amount can change.
The main downside of a homeowner or secured loan is the risk you are taking with your property if you fall behind on repayments.
With a personal loan if you are unable to repay the amount you have borrowed it will damage your credit score, or in the worst case you'll have to declare bankruptcy. Borrowers who fail to maintain repayments on a secured loan can lose their home.
This is why you should only consider taking out a secured or homeowner loan if you are confident you can maintain your payments.
The main alternative to a secured or homeowner loan is to remortgage your property. The risk your home will be repossessed if you fail to meet the repayments still applies. However, if you have a large amount of equity in your home remortgaging may give you access to more of the best loans at cheaper interest rates.