Secured Loans Explained

David Allan

Written by David Allan on November 13, 2013

Updated May 4, 2018

Secured loans explained

If you have never had a secured loan then you may be wondering what they are all about. Here we’ll explain what a secured loan is and how they differ from other types of loans on offer.

A secured second charge loan

A secured loan is a loan that is secured against your property in the same way a mortgage is. It is a second charge loan. Therefore you need to be a homeowner and have some equity within your home to be able to secure the loan against. Most lenders require the borrower to be 21 years of age or older.

Larger loans than unsecured loans

Secured loans are generally larger loans from £5,000 all the way upto £1,000,000 and beyond. The size of the loan you can obtain really depends of how much equity you have within your home and how much you can afford to pay back. Some lenders also have limits on how much they are willing to lend, and each loan application is treated differently and is based upon personal criteria and credit rating.

Secured loans are also generally long term loans that are paid back over 5 – 25 years. Some lenders allow loans to be repaid longer than this.

Read: What is the difference between a secured and unsecured loan?

Read: How does your credit rating affect your loan application?

What a secured loans used for?

Secured loans are popular for debt consolidation which means replacing your existing debts with a more affordable secured loan. Secured loans are popular for making home improvements such as new kitchen, bathrooms and home extensions.

Second loans can be taken out against buy to let property and are popular for landlords who wish to raise money against their investments without the need to remortgage.

If you have a bad credit history then you may find it easier to obtain a secured loan rather than an unsecured loan. This is because you have your home to offer as security against the loan and the lender will be more willing to lend to you. You may also be able to obtain more attractive and affordable rates of interest with a secured loan.

Secured loans are also used for those who need to borrow larger amounts of money and who wish to pay the loan back over the long term.

Using your home as security

It’s important to consider that like a mortgage, if you were to fail to maintain your loan repayments or pay back what you owe on the loan then you may be at risk of losing your home to repossession. In the event that you could not repay your loan then your home would be sold by the lender in order to pay back what you owe plus interest.

The application process

1) Your visit the secured loans comparsion page and request a quote from our approved brokers.

2) We then request some information from you that will enable us to search for a suitable loan based upon your information and our panel of lenders criteria.

Information required

  • Your name, address and contact details. If this is a join application then we would require the details of both applicants.
  • The loan amount – how much you want to borrow.
  • How long you wish to pay it back over – the loan term or period.
  • The purpose of your loan – what do you wish to use it for?
  • We’ll then need to know information about your credit history such as CCJ’s, any missed mortgage or loan payments within the last few years.
  • We then need to know some details of your property (the security for the loan). Is it residential (your home) or is it a buy to let? How many bedrooms, bathrooms, and reception rooms does it have? Is the property ex local authority?
  • Next we need to know some financial information related to the property. Such as your mortgage balance, do you have any other secured loans on the property? What do you consider the value of your property to be? Is it a capital repayment or interest only mortgage?
  • Finally we need to know your employment status and information on your salary and income either for yourself or both applicants if it is a joint application.

With this information gathered your broker is then able to compare this with our panel of secured loan lenders criteria and present a selection of suitable loans. The loan offers presented will take into consideration your personal requirements, your property, income and credit rating.

With this information and guidance from your broker you can then go on and apply for a loan knowing that in principle you already meet the lenders criteria. The lender will have any final say and decision on if they will accept your application for a loan.

What information will I be presented with?

Your broker will present all the information on the loan offer to you so that you can make an informed decision on whether you wish to proceed with a full application to the lender.

You’ll know:

  • The lender or list of lenders who matches your loan criteria.
  • How much money you can borrow – the loan amount.
  • The monthly payment amount.
  • The “type” for example, capital and interest repayment.
  • The APR – annual percentage rate.
  • The cost of loan over the period.

With assistance from your broker you can use the above information to make a decision on your loan. Your broker will then submit your application to the lender upon your behalf.

How long does a loan application take to complete?

The loan application process takes about 3-4 weeks. Upon completion of the loan the lender should deposit the funds directly to your bank account within 48 hours – however this is can a little longer due to administration for some lenders. If you are in a hurry then a good broker can turn around applications even faster and some buy to let applications have been known to take only a few days.

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