Secured Loan
Home – Secured Loan
Secured borrowing explained
A secured loan is money you borrow secured against an asset you own, usually your home. Interest rates on secured loans
tend to be lower than what you would be charged on unsecured loans, but they can be a much riskier option. If you fall behind with payments, your asset might be repossessed, so it’s important to understand how secured loans work and what could
happen if you can’t keep up with your payments.
Secured loans explained
Secured loans can be useful if you need to borrow a large sum of money, typically more than £10,000.00.
The term ‘secured’ refers to the fact a lender will need something as security in case you can’t pay the loan back. This will usually be your home. Some loans might be secured on something other than your home – for example, they might be secured against your car, jewellery or other assets. Secured loans are less risky for lenders because they can recover the asset if you default, which is why interest rates tend to be lower than those charged for unsecured loans.
But they are much riskier for you because the lender can repossess the secured asset – for example, your home – if you don’t keep up repayments.
Types of secured loans
There are several names for secured loans, including:
- Home equity or homeowner loans
- Second mortgages or second charge mortgages
- First charge mortgages (if there is no existing mortgage)
- Debt consolidation loans (although not all of these loans are secured)
Home equity or homeowner loans
You may be able to get a further advance on your mortgage – you borrow an additional amount of money against your home from your current mortgage lender.
This might be a useful option if you’re looking to pay for some major home improvements or to raise a deposit to buy a second home.
This might be a useful option if you’re looking to pay for some major home improvements or to raise a deposit to buy a second home.
First and second charge mortgages
A first charge mortgage loan involves taking out a loan when you have no existing mortgage.
A second charge mortgage involves setting up a separate agreement from your existing mortgage, either with your existing mortgage lender or by taking out the loan with a different lender.
A second charge mortgage involves setting up a separate agreement from your existing mortgage, either with your existing mortgage lender or by taking out the loan with a different lender.
Debt consolidation loans
If you owe money on a number of different products, you can merge them together into one debt consolidation loan. This might be secured or unsecured.
Debt consolidation loans secured on your home could be either first or second charge mortgages.
Debt consolidation loans secured on your home could be either first or second charge mortgages.
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