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Secured Loans

What is a secured loan?

A secured loan is debt that is secured against an asset that you own – this could be your house, or even your car (it all depends on the value of the item compared with the amount you have borrowed).

Lenders like the fact that they can get access to and sell one of your assets that has a definable value and can be sold quickly in the event of a default on your part. Interest rates tend to be cheaper because of this lesser risk for lenders; but the risks for you are very real.

If, for any reason, you cannot make payments in relation to a secured loan, then your creditors can sell the assets (usually your home) that you have used to secure the loan.

Secured loans can come in many forms.  They can be marketed as:

  • Home equity or secured homeowner loans
  • Second mortgages
  • First mortgages
  • Debt consolidation loans (some types are secured loans)
Can I re-mortgage to pay off debt

Most Secured Loans are over £10,000

What is the size of most secured loans?

Most secured loans are used to borrow money usually in excess of £10,000, although it can be less.

In assessing you for a secured loan, lenders will look at the following factors:

  • Your income (a full breakdown)
  • Your credit score
  • Credit commitments that you have
  • The amount of equity in your property

All of the above will affect willingness to lend and the rates that you are likely to be offered.

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Should I take out a secured loan

Consider all your options, including the consequences

Should I take out a secured loan?

It is vitally important to consider the affordability of any secured loan repayments: there is so much at stake if you find that you cannot.

The consequences of failing to make payments can range from affecting your credit score to losing your home.

That being said, there are some instances where it might be worth looking at taking out a secured loan such as a second mortgage.

Keep in mind, it may be more cost-effective to re-mortgage

Under what circumstances should I consider a secure loan ?

These include the following:

  • You are finding it hard to get unsecured borrowing such as a personal unsecured loan
  • Your mortgage has a high early repayment charge, which could make re-mortgaging more expensive than taking out a second charge mortgage
  • You are looking at re-mortgaging, but your credit rating has gone down. (Taking out a second mortgage instead will mean you will pay the higher rate of interest on your second mortgage – as opposed to your whole mortgage if you went down the re-mortgaging route).

If, however, you have some equity in your home, your personal circumstances have not changed since you took out you mortgage and you are not faced with a potentially large early repayment charge on your mortgage, then it would probably be more cost-effective to re-mortgage or to get a further advance from the same lender.

We will advise and help you at every stage

How can TC Debt Solutions help me with secured loans?

If you are looking at a secured loan as part of debt consolidation, we can keep you away from any potential pitfalls and advise you of other solutions that may suit your circumstances better.

Contact the team at TC Debt Solutions for a confidential chat to discuss your options.

Quick Summary

The advantages & disadvantages of secured loans


The pros of secured loans:

  • You will usually pay a lower interest rate than an unsecured loan
  • Repayments are on a monthly basis


The cons of secured loans:

  • You could lose your home if you fail to make payments
  • Repayments could increase (if the loan has a variable interest rate)
  • There could be expensive arrangement fees and associated setup costs involved

ask yourself, can I afford the repayments

Secured loans as a debt solution

Secured loans are not for the unwary or financially naïve.

Secured loans are often marketed as a debt consolidation loan. Giving you the chance to consolidate debt into one payment sounds very tempting until you consider the risks involved.

Before doing anything, it is vital to have a complete and up-to-the-minute overview of your existing debts and the interest rates that you are paying to service them.  You need to be clear how any secured loan would fit into your strategy for dealing with your debts, and use it to pay off only debts that are more expensive.

It is a mistake to take an across-the-board approach to consolidating your debts as you can simply end up paying a higher rate and for longer.

You should check the financial implications of converting unsecured debts, which are generally fixed rate interest for the term of the loan, into secured loans that are almost always variable rate loans.

That means of course that your rate can shift both up and down with UK base rate lending as well as at the discretion of the lender themselves.  It’s definitely worth checking the terms of any proposed secured loan in detail and asking yourself if you could really afford repayments in the event of a shift upwards in interest rates.

Another important thing to bear in mind is that such offers (debt consolidation no credit check) are typically made to people with a poor credit history who would not get an unsecured loan.

If you are thinking of consolidating your debts it could be a sign that you are experiencing deeper problems in paying your existing debts. If you are in this position, you should speak to us: we can explore all your options and alternatives to going down this route.

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It is essential to be clear of the implications of taking out a secured loan and to know what other options are available. Complete our short form and we will contact you straight back.

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