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Secured Loans, Secured Personal Loan - Everything You Need to Know

With so many different terms flying around regarding loans, it can be tricky to know which sort of loan might be best for you. In this article, we are going to talk about secured loans uk. You'll find out what they are, how they work, and discover the various elements you should look at before you consider applying for secured loans online.

If you are wondering whether this would be a good way to borrow money, perhaps for a home project or to pay less each month for any outstanding debts, this article will help you understand how a loan like this can work.

What is the difference between a secured and unsecured loan?

Loans come in many shapes and sizes, making it easier for you to select the best loan for your needs. The two most commonly seen loans are unsecured loans and secured loans. We are obviously covering secured loans in this article, but it will help to understand the differences between them. Once you know the differences, it should be easier to figure out if the secured version is the best option in your case.

Unsecured loans

These loans do not require you to put up anything of value to back up the loan. These are also known as personal loans and people tend to use them for personal reasons. The loan amount could be for anything up to £15,000 and sometimes more.

People choose this type of loan for many reasons. Some people use one for debt consolidation or home improvements. If they have credit cards with high interest rates, they may switch to an unsecured loan over a longer period to help repay the debt. There are fixed or variable interest rate options for these financial products too, so there is much to think about here.

You can also borrow over different periods, such as 3 years or five years. Other longer terms are available too. You should look at the term and the interest rate, so you can work out the total amount you'll repay. As always, think carefully before you borrow money, whether it is to clear cards, tackle jobs around the home, or for any other reason.

Secured loans

A secured loan supplies a way of receiving a loan amount that is secured against something of value. This would usually be your home. These loans also go by other names:

  • A homeowner loan
  • Second charge mortgages

They both mean the same as a secured loan uk, however, the amount you borrow via the loan is secured on your property. This means that if you do not repay the loan or run into difficulties and cannot keep up repayments, you could lose your home. You must always think very carefully if you are looking at secured loans.

Secured loans give you the chance to borrow a higher loan amount because you are presenting the lender with collateral. It's the same as saying that you can return their cash because you have something of value already that you could hand over to clear the debt if you needed to. However, the second charge would be limited to the amount of equity in your property. You would then make repayments on the loan amount and your usual monthly payments on your mortgage as well. We'll cover equity and what it means in more detail later in this article. It's an important element to understand while you consider this option.

You can use secured loans for many of the same reasons you might use an unsecured loan. If you have debts on several credit cards, taking out a secured loan to clear them all would leave you with one manageable monthly repayment. These loans could have far lower interest rates than a credit card, for example, so you may find you pay less in interest overall if you can get the best deal. It is important to ensure you do not get into further debt if you are using a loan for debt consolidation, however.

Is a secured loan right for you?

This is an important question to ask. A lot depends on whether you are a homeowner, since secured loans are typically secured on property. If you rent or do not have enough equity in your property, you won't be eligible for secured personal loans.

Securing other debts on your home always carries risk. If you find you are unable to repay the loan at any stage, you could end up losing your home. Think about why you are considering borrowing and whether it is the right decision. Lenders may repossess your home if you do not keep up the monthly loan repayments on loans secured on the property.

Conversely, if you are looking to borrow over a longer period than you would normally borrow with an unsecured loan, this might be a reasonable alternative to consider. You might also think about the interest rate. It is more common to find cheaper interest rates for secured loans, as they carry a lower risk for lenders. Again, the term you borrow over will affect your monthly repayments and the total amount you will pay back. Borrowing for 5 years would bring higher monthly repayments than borrowing for 10 years, but you would pay less interest.

Be certain you understand the risk of a homeowner loan

A homeowner loan or secured loan does carry risk, as do all loans. No matter which loan you take out, you must be sure you repay it on time. This applies to all manner of secured and unsecured loans. Loans secured via second charge mortgages are riskier though, as you are putting your property forward as collateral for the loan.

Before you apply for a secured loan, you must consider the element of risk. Think carefully before securing this type of loan on your home. Any debts against your home present a risk to it. If you do not maintain your monthly repayments, your home may be repossessed. This would be catastrophic and would likely have a significant negative effect on your credit score too. Your credit score influences whether or not lenders decide to grant you a loan.

A lender will want to get their money back. If you do not pay back the sum of money loaned, along with the agreed interest, lenders may attempt to get their cash from the sale of your property. You should be sure you are clear about this - a lender can repossess your home if you do not or cannot pay it back.

Consider your current circumstances and the reasons why you are looking at a loan. It may be that you are currently paying more for your monthly card payments than you would if you consolidated everything, as we highlighted earlier. However, your home will still be at risk. No matter the reasons why you are thinking about a loan, it is vital to make sure you work out the figures and make sure you are clear on what you would be taking out.

Do you have enough equity in your home?

You must have equity to be considered for a secured loan. For instance, if you would like to borrow £10,000, you must have more than that available as equity in your property. If you only had £5,000 available, you wouldn't be able to get the loan.

This is simple enough to understand, but it is wise not to apply for the maximum amount you can get. When you compare secured loans, look for amounts that fit with the available equity. You can get a rough idea of the available equity by checking an estimate for your current property value and comparing that to the outstanding amount left on your mortgage.

If the value of your property fell, you may be left with negative equity. This means you owe more than your property is worth. Just because you have a loan alongside a regular mortgage, it doesn't get rid of the fact that you owe more on it than you could get by selling it. Be very careful in this situation.

Considering secured loans poor credit options

It is possible to get secured loans for bad credit, but as with all loans, there are many considerations to think about first. It is possible to find a secured loan with bad credit, but it is likely to be more challenging than getting one if you have a good credit history. All lenders want to know whether you are a good risk. A credit check can help them decide whether to lend to you or not.

Some people with a poor credit rating want to know whether they can get a secured loan no credit check required. The answer is no. If you wish to make a formal application for a loan secured against your home, the lender will want to check your credit score. This acts like a fingerprint, telling the lender how responsible you are with debts and repayments. It also applies to everyone, so your credit history isn't going to matter in this sense. You'll always undergo a check of this kind when a lender is thinking about loaning you the money you are looking for.

How to compare secured loans

If you decide that secured loans represent the best solution for you to borrow money over a period of time, you'll want to find the best loan you possibly can. This means you need to find the right loan for you.

We'll cover some of the most important elements to think about here.

Look at interest rates

Obviously, you want a lower interest rate if possible. The lower the rate for the loan secured on your home, the less you will pay overall. Homeowner loans vary considerably in the interest rates offered. You may be able to get a rough idea of what to expect before you apply for a secured loan or personal loan.

It is important to think about whether a variable rate or a fixed rate would best suit you. A fixed interest rate has the advantage of giving you the reassurance that your monthly repayment won't change. You can find the best deal and know exactly what you'll pay back each month.

A variable rate deal gives you just that - an interest rate that can vary. This means it could go up or down. The lender offers homeowner loans connected to the Bank of England base rate. If that rate goes up, the rate on your loan is likely to go up as well. If they go down, the lender may decide to pass on that saving to you, although this isn't guaranteed (unless it appears in the terms for your loan). Your loan may have the lender s standard variable rate applied.

Rates may also vary depending on your credit rating. Someone who represents a good risk may get a better rate, for example, than someone who wants a secured loan bad credit UK deal.

Consider any added fees

Homeowner loans are available via brokers and direct lenders. If you get a loan via a credit broker, there could be a broker fee or arrangement fees involved. They should indicate how much the broker fee is before you agree to go ahead. However, the secured loan direct lender alternative gives you a direct route to secure the loan you need. Secured loans with bad credit may still incur arrangement fees, but again, the facts should all be clear to read and understand, so you can decide before accepting the offer of the amount you want to borrow.

You should also find out whether the secured loans you are looking at could have early repayment fees. These can apply to both variable rate and fixed rate deals for secured loans. If paying back the loan early incurs additional fees, you may wish to continue with the monthly payments to clear it that way. Early repayment does give you something else to think about though.

Do you need a secured loan for bad credit?

Secured loans bad credit are a niche area of the secured personal loan arena. If you have a less than stellar credit history, you may find you cannot easily get secured loan lenders to take you seriously.

In this case, consider searching for secured loans for poor credit. The overall cost you'll pay could be higher, as these products may have a higher interest rate. The lender must take into account the increased risk level in lending to you.

It may be easier to get a secured loan as you have collateral. An unsecured loan would not have this advantage. However, you may still find it more challenging if your credit score is lower than you would like it to be.

Make sure the lender is properly registered

Lenders must be authorised and regulated by the Financial Conduct Authority. This is easy enough to check, so make sure you do your research before even considering a personal loan from any source.

While you could name plenty of banks and building societies, there are likely some other lenders you won't have heard of. You can check with the Financial Conduct Authority to make sure you only select a trusted loan provider.

Finding a secured loan bad credit direct lender

Do you know where to get a secured loan with bad credit? It is often easier to look online for secured loans for bad credit UK, as you can find lots of sources of information for secured loans. No credit check is completed until you formally apply, so you can compare loans and see how much you could potentially borrow over the longer term.

Can you get secured loans for bad credit instant decision?

Applying for loans online can be faster than visiting a lender to enquire about their services. You can also do your research and apply from the comfort of your home.

However, you won't usually get an immediate decision on a loan, whichever way you choose to apply. Some applicants may receive a decision quite quickly, but it isn't likely to be instant. This applies regardless of whether you go through a credit broker or direct to a lender.