Finding the best secured loan for you

Secured loans are a common type of loan people turn to. Learn everything you need to know and what to look out for when getting the best deal with our guide.

What is a secured loan?

Secured loans are also known as second charge mortgages or homeowner loans.

A collateral loan is secured against an asset you own. In most cases, this is your home or a property that you have a stake in.

The value of your property is used as collateral, so the equity in your home will be used to repay the debt if you default on your loan. This means your home could be at risk if you’re unable to keep up with repayments.

What’s the difference between an unsecured loan and a secured loan?

An unsecured loan is also known as a personal loan. You don’t need to provide security, and repayment terms are more flexible. You can use a personal loan for any purpose, such as buying a car or going on holiday, however, If your credit score is poor, your loan application could be rejected.

A secured loan, on the other hand, is collateral finance which means it’s a secured loan against property or an asset. Loans secured by property are typically for larger amounts and are borrowed over a longer period. A homeowner loan is less dependent on your credit history but could be riskier.

You can use a secured loan for:

  • home improvements
  • house repairs
  • starting a business
  • buying a second property
  • to consolidate debts

We’ve outlined the main differences so you can work out what’s best for you.

Secured loan

  • Minimum loan amount of £5,000
  • Maximum loan amount of £500,000
  • Typical loan term of up to 35 years
  • Collateral is needed and a mortgage is required
  • The typical interest rate is variable
  • Can get them with a bad credit score

Personal loan

  • Minimum loan amount of £1,000
  • Maximum loan amount of £50,000
  • Typical loan term of 7 years
  • Collateral or a mortgage is not required
  • The typical interest rate type is fixed
  • Can not get them with a bad credit score

*There are some fixed rate secured loans on the market, so check with your broker.

Are there different types of secured loans?

Different types of secured homeowner loans affect the rate of interest you pay. The rate of interest affects your monthly repayment amount and overall loan cost.

Fixed rate

The interest rate and monthly repayment amount are fixed for an agreed term. This means your payments will remain the same throughout the borrowing period.

Variable rate

The interest rate may fluctuate depending on market conditions, therefore your monthly repayment will vary.

Short-term fixed-rate

This is a combination of the two where you may be on a fixed rate for the first five years and move on to a variable rate for the remaining term.

How much can I borrow with a secured loan?

The maximum amount you can borrow will depend on the value of your property. The more home equity you have, the greater amount you could potentially borrow.

You can typically borrow anything between £10,000 and £500,000 if you have the equity in your home to cover the cost.

If you want to borrow less than £10,000, a personal loan could be a better option for you.

Can I get a secured loan with bad credit?

Yes, you can get secured financing even if you have bad credit. As long as you have a mortgage and equity in your home, it’s possible to borrow against your house and get a secured loan.

In many cases, it could be easier than getting a personal or unsecured loan, but that will depend on the amount of risk the lender is prepared to take.

Sometimes, secured homeowner loans with bad credit can be used to consolidate debt to help you manage your repayments better. If you keep up regular payments on time and in full, a secured loan may help you repair your credit score.

How much do secured loans cost?

How much you pay for a homeowner loan will depend on a number of factors. The eventual cost will depend on:

  • the amount of money you borrow
  • the length of time you need to repay the debt
  • the rate of interest
  • any loan fees charged

Speak to a secured loans broker or use a comparison website to find out how much you could borrow and how much it will cost you.

What to consider when looking at secured loans

Before you apply directly to a bank or online lender it makes sense to compare what’s available to you, so you can get the best homeowner loan for your circumstances.

It can be hard to know where to start, so using a secured loan broker can save you time and effort. A broker can access all the loans on the market and find the best secured loan for you.

Borrowing a large amount of money over a long period of time is a big commitment, so before you decide to go ahead, think carefully about;

  1. How much you need to borrow: If it’s less than £25,000 a personal loan could be a better option.
  2. How long you need to repay the loan: Work out what you can repay each month and opt for the shortest term you can afford.
  3. How much home equity you have: You’ll need an up to date valuation of your property and the outstanding balance on your mortgage.
  4. Your credit history: It’s worth checking your credit record for mistakes and carrying out a soft check to find out your credit rating and the likelihood of being accepted.
  5. Whether you want to borrow against your home: Ask yourself how secure your income is, can you repay the loan over the long term and do you want to risk losing your home?

What are the advantages and disadvantages of a secured loan?

If you own property and qualify for secured financing, then it can be a good borrowing option, but there are pros and cons to consider.

Here are some factors to help you decide whether a secured loan is right for you.


  • You can borrow large amounts of money, up to £500,000
  • You can stretch out repayment over a longer term, up to 35 years. Doing this can reduce your monthly payments
  • It’s easier to get approved because you’re less of a risk to the lender
  • If you have a poor credit score, your home as collateral will reduce the lending risk


  • If you default on the loan, the lender can repossess your home to recover the debt
  • Extra charges and arrangement fees can be very high
  • Some loans have variable interest rates, so your repayments could increase
  • If you want to pay off your loan early, you may need to pay early repayment fees
  • You could damage your credit score if you miss or regularly make late payments

If you’re still not sure, consider contacting a secured loan broker who can talk through your options and answer any questions.

What is needed for a secured loan?

The most important requirement for a secured loan is an asset to use as loan collateral. In most cases, this is a property.

When you make your application, you’ll need the following information to hand:

  • Mortgage statement
  • Bank statements
  • Proof of identity, i.e. passport or driving licence
  • Evidence of income and expenditure
  • Details of any outstanding debts

Is a secured loan a good idea?

Although a secured loan can be a good way to use the equity in your home to release extra funds, it’s important that you understand the risk.

Put simply, if you cannot make repayments on your secured loan, your house could be repossessed and sold.

However, the headline interest rate is often lower, so if you’re renovating your home or starting up a new business and need funding upfront, you can make a secured loan work to your advantage.

The total cost of your loan will depend on the amount you have borrowed and how long you take to repay it. Your credit rating will determine the rate of interest you’re given, so if you have a good credit score it can be a cost-effective way to borrow.

If you’re approved for a secured loan with bad credit and make your repayments in full and on time, you can use collateral finance to improve your credit rating and rebuild your credit score.

Are there any alternatives to secured loans?


Remortgaging can be an alternative to taking out a secured loan. You’ll need enough equity in your home to release the funds, and upfront fees could be high. You’ll be extending the mortgage term, so you will end up paying interest on your mortgage for longer.

Home improvement loans

Some lenders offer large unsecured loans specifically for home improvements. You can borrow up to £25,000 and pay it back over a set period of time. You will need a good credit rating to get approved for this type of unsecured loan.

Personal loans

A personal loan is a standard loan from a bank, building society or lender. You do not need to provide collateral and terms of repayment tend to be more flexible. However, if you’re looking to borrow a large amount, this could be a costly option and mean high monthly repayments.

Peer to peer loans

If you have a good credit score, peer to peer lending, also known as P2P, could be a cheaper way to borrow. P2P banking is an online platform that assists people to lend and borrow from each other rather than a bank or lender.

Debt consolidation loans

If you’re seeking a secured loan to pay off multiple debts, a debt consolidation loan allows you to borrow a set amount to pay off multiple debts, e.g. credit cards, store cards and overdrafts, which you then pay back with one monthly payment.

If you’re having trouble keeping track of what you owe, this can be a helpful way to gain control over your debt and build your credit score.

Secured loans FAQs

Are secured loans easier to get?

In some ways, yes, because you’re providing the lender with security and are viewed as less of a risk. If you qualify but have a poor credit score, you’re more likely to get accepted for a secured loan over a personal loan.

However, because a number of background checks need to take place, like having your home valued, the process will take more time and effort from you.

Is a homeowner loan the same as a mortgage?

No, a mortgage is a loan specifically for buying property or land, whereas a homeowner loan is money you borrow which is secured against your house.

How many homeowner loans can you have?

In theory, you can have as many secured homeowner loans as you like, providing you have enough equity in your property.

Is it better to have a secured or unsecured loan?

There are pros and cons for both types of loans so it depends on your financial circumstances.  It makes sense to talk to secured loans brokers to discuss your funding needs so you get the right loan for you.

Why are secured loans less costly?

They are not necessarily less costly even though the interest rate and APR may be lower. You may have to pay arrangement and valuation fees on top of the amount you’ve borrowed plus interest over a longer period, which could mean you’ll end up paying more in the long run.

How long after buying a house can you get a secured loan?

It’s likely that as a new homeowner, you only own a small percentage of the property’s value.  The lower your equity, the higher your risk so most lenders will limit secured finance to customers who’ve owned their home for less than 6 months.

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