A secured loan can put your home or another valuable asset at risk if you cannot keep up repayments. If you are considering a secured loan to consolidate existing debts, speak to a free debt advice service first — they can help you understand all available options:
- StepChange — 0800 138 1111 — stepchange.org
- National Debtline — 0808 808 4000 — nationaldebtline.org
- MoneyHelper — 0800 138 7777 — moneyhelper.org.uk
What is a secured loan?
A secured loan is one that is tied to an asset — most commonly your home. If you cannot repay the loan, the lender has a legal right to repossess that asset to recover the debt.
The amount you can borrow depends on the value of the asset used as security, your income, your credit history, and the lender’s affordability checks.
What types of secured loan exist?
“Secured loans” is an umbrella term covering:
- Home equity or homeowner loans
- Second mortgages (second charge mortgages)
- First charge mortgages
- Some debt consolidation loans (though not all consolidation loans are secured)
How secured loans differ from unsecured loans
Because the loan is tied to an asset, lenders take on less risk — which can mean lower interest rates than unsecured alternatives, and the option to borrow larger amounts over longer terms. However, the risk transfers to you: missing payments can lead to repossession.
The amount available varies by lender, property value, equity, income, credit history, and affordability checks. You should not treat any figure quoted by a comparison site as a guarantee of what will be offered to you.
The risks
- Your home may be at risk. If you cannot keep up with repayments, your lender has a legal right to repossess your home and assets.
- Variable rate risk. Some secured loans have variable interest rates, meaning repayments could rise over the life of the loan. Always confirm whether your rate is fixed or variable before proceeding.
- Fees and charges. Arrangement fees, legal fees, and early repayment charges can significantly affect the total cost. The APRC (Annual Percentage Rate of Charge) includes these fees and is the most useful figure for comparing secured loan offers.
- Soft search vs hard search. Some comparison tools run a hard credit check before providing a quote, which can affect your credit score. Ask for a soft search or quotation search where possible before committing.
What to compare
When comparing secured loan offers:
- Compare the total amount repayable, not just the monthly payment
- Use the APRC rather than the headline rate — it includes fees
- Check whether the rate is fixed or variable, and what happens after any fixed period ends
- Check early repayment charges — you may be penalised for repaying early
- Check arrangement fees — some lenders charge several thousand pounds upfront
If you have an existing mortgage, your current lender is a reasonable starting point, but compare their offer against others before deciding.
What lenders assess
When applying for a secured loan, lenders typically assess:
- Your income — evidence that you can sustain repayments, including if your income changes
- Your equity — if you have a mortgage, the lender will want to see sufficient remaining equity in your property
- Your credit history — both your credit score and the detail behind it: missed payments, existing debts, and credit utilisation
The advantages of a secured loan
- Can offer lower interest rates than some unsecured alternatives, because the loan is secured against an asset
- Can allow larger borrowing amounts and longer repayment periods
- May be available to people with lower credit scores, because the lender has security — though rates will typically be higher
The disadvantages of a secured loan
- Your home or asset is at risk if you cannot repay
- Variable rate loans may become more expensive over time
- Fees and charges can significantly increase the total cost
- Converting unsecured debts to a secured loan means debts previously without property risk now carry that risk
Free help
If you are struggling with existing debts or are unsure whether a secured loan is right for your situation:
- StepChange — 0800 138 1111 — stepchange.org
- National Debtline — 0808 808 4000 — nationaldebtline.org
- MoneyHelper — 0800 138 7777 — moneyhelper.org.uk
- Citizens Advice — citizensadvice.org.uk
Related guides: Homeowner Loans · Debt Consolidation · Personal Loans