Secured Loans

A report in March 2005, commissioned by shadow chancellor Oliver Letwin, identified that personal borrowing in the UK now stands at over £1 trillion, or £17,000 per adult. The report concluded that most of this is in debt being secured against housing. Secured debt includes mortgages and other secured lending such as secured loans, which may also be referred to as second mortgages, or second charges on a property.

So why are secured loans so popular?

• Secured loans are available to owners of property, including ex-council properties. Some lenders will also accept applications from landlord owners of tenanted properties.
• With a secured loan, you can borrow more. Lenders vary, but nowadays some lenders will lend to an upper limit of 125% of the value of your property. With unsecured loans, there are sometimes a few restrictions on what you can use your loan for.
• You can repay your loan over a longer period, keeping monthly repayments very low. Loan terms of anything from 3 years up to 25 years are possible. This is far longer than would be the case with an unsecured loan.
• Secured loans can be used for almost any purpose. There are few if any restrictions. You can even use them to repay existing debt, and consolidate all your repayments into one manageable sum. If you use them to increase the value of your property, for example by building an extension, you will also be increasing value of the equity in your home, so you will owe a smaller percentage of the amount your home is worth.
• They are more readily available for people who are self-employed, or who have a poor credit history. Secured loans are frequently easier for people in these circumstances to get approved.

What are the risks?

It's true that because secured loans are secured against your property, the lender may have a right to force the sale of the property if you do not keep up the repayments. So the major disadvantage of a secured loan is that you have used your home as collateral. But in return, you will have gained a better rate, plus the ability to borrow more and over a longer time period.

Explore Finance helps thousands of people with loans every week. Apply now for a quotation and we will approach our pool of lenders on your behalf to secure you the best deal.