Compare Secured Loans

What is a secured loan?

If you are a homeowner and need access to a larger sum of money, you may be able to get a secured loan. Secured loans are also known as homeowner loans, and they’re ‘secured’ against an asset, usually your home. This means they provide confidence to lenders, but at the same time can be risky for borrowers.

If you take out a secured loan and fail to keep up with repayments, the lender has the right to force the sale of your property in order to cover the repayment of your debt. This could mean losing your home, so it’s always advisable to consider all loan options to see if there’s a more suitable and less financially risky alternative available before you commit to a secured loan.

» MORE: Is a secured loan the right option for me?

The difference between a secured loan and an unsecured loan

They may sound pretty similar, but there are some important differences between a secured loan and an unsecured loan.

Perhaps the most significant is the higher risk that a secured loan poses to a borrower given the need to put up an asset such as your home as security, compared with an unsecured loan, where no collateral is required. The legal implications of providing such an important asset as security means applying for a secured loan can be more complicated and more expensive too. Of course, you’ll need to own a home in the first place as well, whereas with an unsecured loan, you don’t.

On the other hand, it’s often possible to secure a larger loan with a secured loan, and interest rates tend to be lower than with an unsecured loan, because the lender is taking on less risk and may offer longer repayment periods too. Secured loans may also be easier to obtain than an unsecured loan if you have a less favourable credit rating.

» MORE: Unsecured loans versus secured loans

Pros and cons of a secured loan

If you think a secured loan could be right for you, consider the pros and cons of this type of borrowing before you dive in:

How to choose a secured loan

If you decide a secured loan is the right option for you, you’ll need to begin comparing providers. Many will require borrowers to work through a broker to arrange a secured loan, so you may not be able to apply for one directly with a lender – although a good broker should provide all the information you need to help you make your decision.

While you could choose a secured loan provider based on how much they’ll lend and how long they’ll give you to pay it back, the actual amount you’re offered will depend on your financial situation.

How can a secured loan calculator help?

A secured loan calculator, like the one at the top of this page, can help you figure out how much your secured loan monthly repayments could be over a specific time. It can offer you a quick, ballpark figure that can be useful when comparing different loan deals from different providers.

What to consider when comparing secured loan providers

• The cost of the loan: Take a look at the annual percentage rates (APRs) that lenders advertise, as these will help you to gauge the cost of a loan, including interest and other fees and charges.
• The loan term: Each lender will offer different maximum and minimum loan terms, so it’s important to choose a timescale that works for you. Remember, the loan term you are offered will be affected by factors like your financial situation and your credit rating.
• The loan amount: The amount the lender will offer is obviously of vital importance when deciding between secured loan providers.
• Lending criteria: Working with a broker can help you understand whether you will be eligible for a secured loan before applying. Some lenders will have stricter or differing requirements than others. It’s important to avoid applying for a loan and being rejected, as this can have a negative impact on your credit rating.

» MORE: Tips for successfully applying for a loan

What are the alternatives to a secured loan?

There are a number of alternatives to secured loans that could be less risky, cheaper, or both depending upon your situation:

• Remortgaging: If you require some more cash for home improvements, for example, and you have enough equity in your property you may be able to borrow extra from your current mortgage lender. Alternatively, you may be able to remortgage onto a cheaper deal that frees up an amount of income each month.
• Borrowing from family or friends: Although it’s not always easy to ask, family or friends might be happy to lend you what you need.
• Overdrafts or credit cards: Your bank may be able to extend your overdraft to meet your needs, providing you with a much less risky borrowing option. The same can be said for credit cards, especially if you can find one with an interest-free initial period. These types of credit though are not suited to large, longer term debt.
• Unsecured loans: An unsecured loan might be more difficult to get, for larger, longer term borrowing, but it’s worth considering all types of loan depending on your needs. You’ll need a good credit score for an unsecured loan.

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