Secured loans

Compare secured loans and check your eligibility [1]

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What is a secured loan?

A secured loan is one which uses an asset as security for the lender in case you fail to repay the debt.

This is your home typically, but it could also be your car or a piece of jewellery that’s worth more than the loan amount.

It works just the same as a personal loan, except for the fact that if you default on your payments, you’re at risk of losing whatever is being used as security. So, you could have your home repossessed to pay off the debt.

As the lender has security, you may be offered lower interest rates and longer terms than if you took out an unsecured loan. You may also be able to access one if your credit score isn’t great. You must consider carefully if this type of loan is right for you if you have low or bad credit score. There will be a risk of losing your house if you cannot make the repayments in time.

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Is a secured loan right for me?

If you want to take out a secured loan by yourself (not with a guarantor), obviously you’ll only be accepted if you own an asset that it can be secured against.

Because there’s a lot at risk, it’s important to be certain that you would be able to make your repayments, even if your circumstances were to change – for instance if you were made redundant or your household bills increased. Make sure you always have a contingency plan in place.

How much can I borrow with a secured loan?

It will depend on how much the asset is worth. If you’re using your home as security, you may be able to access a much larger loan.

How much equity you own in the property and the value of your home will also determine whether you’ll be approved for a larger amount. It can be possible to access secured loans of £100,000 or higher though.

Borrowing such a large amount is a huge financial commitment, which could have serious repercussions if you weren’t able to keep up with your payments. You’ll also end up paying a large amount in interest over the loan term.

The rule of thumb is to take out the smallest amount possible that still covers your needs for the shortest amount of time. This will help keep the costs down.

What are the pros and cons of secured loans?

The advantages of taking out a secured loan are:

  • You can potentially access lower interest rates than on a personal loan
  • Able to choose longer loan terms which can make monthly payments more affordable (although you end up paying more overall)
  • Possibility of loaning more money than on an unsecured loan, which generally only go up to £25,000
  • Having a poor credit score doesn’t have to be a dealbreaker because the lender has security

However, they do have their drawbacks:

  • The most obvious disadvantage is that you face losing your home (or car) if you can’t repay your debt
  • There do tend to be fees for taking out a secured loan, for instance set up charges
  • As mentioned above, longer terms do mean that you’ll be paying back considerably more than you originally borrowed
  • Watch out for early repayment charges if you want to overpay or pay off your loan before the term ends. These can be expensive and vary between lenders

Types of secured loans

There are a few different types of secured loan to consider before you make a decision:

  1. Homeowner loans

    A loan that is secured against your home and uses it as collateral should you fall behind on your payments

  2. Logbook loan

    This is when your car is used as security for the loan. The lender will own your vehicle during the entire loan term until it’s fully repaid

  3. Mortgages

    Used to buy property or land. You put down a deposit and use a loan from a mortgage provider to pay the rest. Your home can be repossessed if you miss your repayments

  4. Second-charge mortgages

    This is separate from your original mortgage and uses your equity in the property as collateral. It’s typically used to pay for home improvements

  5. Bridging loans

    Can be useful when you want to purchase your next property but are yet to sell your current one. Uses your home as collateral, so you can put down a deposit

  6. Debt consolidation loans

    Can be used to pay off existing debts, so you make one monthly repayment with a lower interest rate to a single lender, rather than multiple high-interest payments

  7. Guarantor loans

    A family member or friend agrees to pay off your loan if you fall behind on repayments. Some require the guarantor to secure the loan against their home

Secured loans and interest rates

When comparing loans, you can choose between:

Fixed for term

You’ll pay the same interest rate for the entire loan term

Short-term fixed rate

There’s a fixed rate of interest for an introductory period, after which you’ll be switched to the lender’s standard variable rate

Variable rate

The amount of interest you’ll pay will fluctuate in line with the Bank of England base rate. This means it could go up as well as down

What do I need for a secured loan?

You’ll need an asset which you own for the lender to use as security.

You must own the car or piece of jewellery you want to use as collateral and the value of it must cover the loan amount.

If it’s your home, you’ll be required to have a certain level of equity in the property depending on how much you want to borrow, and it will need to be of a certain value.

You will still have to pass an affordability check and eligibility criteria even if you’re applying for a secured loan. Repossession of an asset is a fallback in extreme circumstances, so you need to be able to make the monthly repayments comfortably.

What’s the difference between a secured and unsecured loan?

An unsecured loan provides no security to the lender that you’ll make your repayments to. So often you can only borrow amounts up to £25,000 and you’ll be required to have a good credit score, especially for larger amounts.

Interest rates tend to be higher than on secured loans and the loan terms are shorter. But, of course, there’s no risk of losing your home or car if you fail to repay the loan.


The larger the loan, the fewer alternatives available.

In fact, for larger amounts of up to £25,000 (£50,000 in some cases), a personal loan is really the only other option available. You’ll need a good credit score and an income that demonstrates you’ll be able to make the repayments comfortably.

For smaller amounts, consider 0% or low-interest credit cards or overdrafts, these can help you to borrow cheaply if used correctly.

Can you get a secured loan with bad credit?

Yes, in fact you’re more likely to be accepted for one over a personal loan if you have bad credit.

When you apply for a loan, no matter what kind, the lender assesses the risk of not receiving their money back. So, if you have a poor credit score, this can indicate that you haven’t been the most reliable with borrowing and paying back debt previously.

However, with a secured loan, they already have an assurance that if the worst comes to worst, they can recover their money by selling off an asset. This means that they may be a bit more lenient on their affordability checks, although they will still want to ensure that you’re able to make the monthly repayments.

There’s also the option of a guarantor loan, where a loved one uses an asset as security for your loan. They’ll be required to have a good credit score, but you won’t necessarily need one to be approved.

Frequently asked questions

All you need to do is tell us some information about the loan you’re looking for and some details about yourself and your income.

We’ll then perform a soft search on your credit report, which doesn’t affect it at all, to let you know which loans you have a higher probability of being accepted for. This helps to reduce rejected applications which can negatively affect your credit score.

All you need to do is compare the loans available and choose the right one for you.

They can be because the value of the asset is taken into account. They’re more likely to accept someone with a poor credit score and offer a larger amount.

This will vary from lender to lender, but you may be able to get a secured loan with a poor credit score.

A good credit score will enable you to access better rates, which means that your loan will be cheaper.

You can pay it off before the end of the loan term, but you could face early repayment charges which could outweigh the benefits of doing so.

This will depend on how much you want to borrow and your financial circumstances.

If you have a less than stellar credit score, own a home and want to borrow a larger amount, you may want to think about a secured loan.

If you have a good credit score and want to borrow less than £25,000, consider a personal loan.

Yes, it’s possible. They’re called logbook loans, but you’ll be required to own the car outright before you can apply for one.

They’re an expensive way to borrow and the car must be worth more than the loan amount. During the loan term, the lender will own the car until the full amount is paid off.

It’s possible to use your pension as collateral for a secured loan. It’s a very expensive way to borrow though and you may even be required to take out life insurance as part of your application.

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