Guide to Secured Loans

Secured loans, also known as homeowner loans, are usually loans of a large amount which effectively use your home as equity.

With many personal loan deals only paying out up to £15,000 secured loans can be a good option if you need to borrow more. They are also popular with people who have a low credit score and can’t get a personal loan.

Key Features of a Secured Loan

  • Allow you to borrow usually between £5,000 and £125,000
  • Your home effectively secures the loan, this means that if you default on the loan, your home could be repossessed by the lender to pay off the debt
  • You pay back the loan through fixed monthly payments
  • Your application for a secured loan will involve more than an unsecured loan e.g. it will consider your income, credit score, existing credit commitments and the value of your property

What's the Advantages?

The clear advantage of a secured loan is the chance to get larger amounts of money lent to you which you pay back each month. The main disadvantage is that if you default you could end up losing your home.

If you are concerned that the you may lose your home what are the alternatives? The main alternative is to take out an unsecured loan. The most you can often borrow is £15,000, payable over 5 years. This will not put your home at risk but it won’t help you if you are looking to borrow more than £15,000.

If you do need more then you may want to consider remortgaging. Mortgage rates are often lower than secured loan rates. But this also has its downsides-you will pay upfront fees and you will pay interest for longer on the whole amount owed.

In Summary

The best advice is to shop around for the best deal and take financial advice. Do remember that whilst secured loans allow you to borrow significant amounts of money, you could lose your home if you default on the loan.

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