Bad Credit Secured Loans
- We've teamed up with award winning broker Norton Finance to help find the best secured loan for you, even if you have bad credit history or CCJs
- Secured loans are only available to homeowners and usually have to be applied for through a broker using your property as security
- Use the calculator below and get a free no obligation quote that won’t affect your credit rating
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a loan or any other debt secured on it. Show representative example
Please note: Loans displayed have a minimum term of 12 months and a maximum term of 300 months. Maximum APRC charged 49.9%. Rates displayed are the lowest available for each lender based on 60% loan-to-value (LTV).
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
Our comparison service is generated using information supplied by Norton Finance with whom we have a commercial relationship. This does not effect the pricing achieved by consumers.
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What is a secured loan for bad credit?
A secured loan is a loan that is secured against an asset which you own or part-own. Since this type of loan provides a lender with collateral, which means that the lender could repossess that asset if you are unable to keep up with your loan repayments, it presents less risk to the lender.
If you need to borrow money but have a bad credit rating, then lenders might be more reluctant to loan you money, particularly large amounts, as they consider you to be a higher risk customer. Secured loans help mitigate the risk posed by your credit score by strengthening the arrangement with collateral, which adds a second layer of assurance.
In addition, as the lender might consider you to be a higher-risk borrower because of your poor credit history, they are likely to charge a higher interest rate than those offered to borrowers with excellent credit scores.
Why do I have a bad credit rating?
There are many reasons why someone has a bad credit rating. It could be due to taking on too much debt, having late or missed payments on their record, not paying utility bills on time or just not having built up enough of a credit history for a lender to be able to get a good idea of how you manage your personal finances. Other factors such as not being on the electoral roll or having moved house recently could also affect your credit rating.
Before applying for a loan of any kind it is a good idea to check your credit rating first.
It is certainly possible to fix a bad credit rating over time but if you are looking for a loan in the near future then a bad credit secured loan might be one of your best options.
How much will I be able to borrow?
How much you can borrow will depend on the lender, your current credit rating, how much debt you already have, your income, and the value of your home. Lenders will look at how much you can afford to repay each month over the lifetime of the loan and what other financial commitments you already have.
How to get a secured loan with bad credit
While you might be considered a higher risk customer than someone who has an excellent credit rating, it is still possible to get a secured loan even if you have missed payments on your credit report. If this is the case, it might be worth going through a specialist credit broker who will be able to advise you on the likelihood of getting a loan from a certain provider, as lenders will all have their own criteria when considering someone for a secured loan.
Who offers bad credit secured loans?
An increasing number of lenders now offer bad credit secured loans. Some institutions allow you to apply directly to them, while others only accept applications via specialist brokers.
Pros and cons of taking out a secured loan with bad credit
- Approval rates can be higher than other forms of loan due to them being ‘secured’.
- Secured loans tend to be for larger amounts of money than unsecured loans, meaning you can borrow more.
- Applying for a secured loan targeted at people with bad credit ratings means you are less likely to be turned down because of your poor credit score.
- Taking out a loan and managing it responsibly should improve your credit score over time.
- You risk losing the asset which you put up as collateral for the loan such as your car or your home.
- It is a long-term financial commitment.
- You have to keep up with your monthly repayments or risk damaging your credit rating even further.
- You won’t be able to apply for a secured loan without a substantial asset to guarantee the loan.
Alternatives to secured loans
There are a number of alternatives to products labelled as secured loans which might be a better option depending on your personal circumstances. You could remortgage your house to increase the amount borrowed on it, although you need to compare this option against a secured loan to make sure it is not costing you more money. If someone is looking to borrow a smaller amount, say, less than £25,000, they might want to look at unsecured loan options for bad credit as well.
You could also see whether a guarantor loan would be more suitable for you. Unlike no-guarantor bad credit loans, guarantor loans are a way of improving your chances of getting an unsecured loan by asking a friend or family member to guarantee the loan. The guarantor is required to meet the monthly payments or even pay off the loan in full if the borrower is unable to do so.
How to improve your credit rating
There are many ways to improve your credit rating and if you have time, it might be worth trying to fix your credit score before applying for a loan as you will have a greater chance of being accepted and could be offered a lower interest rate or a higher loan amount. Improving your credit rating can take several months though, as the credit ratings agencies tend to update their information every four to six weeks. You can easily check your credit score with one of the main credit agencies.
You can improve your credit score by taking some simple steps such as:
- Making sure you are on the electoral roll.
- Making sure your details are correct and there are no outstanding issues which could affect your score.
- Making sure your current and previous address details are correct.
- Carrying out soft credit searches when applying for credit to find out your chance in advance of a proper application which will leave a mark on your credit report.
- Try and reduce the amount of debt you have.
You can avoid damaging your credit score in the future by:
- Making sure you pay all your bills and financial commitments such as credit cards and loan repayments on time.
- Set up direct debits to ensure all payments are made in full and on time.
- Resist applying for several loans or credit cards over a short period of time.
Bad Credit Secured Loans FAQs
Can I get a secured loan with poor credit?
Possibly. There are lenders that will consider borrowers with poor credit records for a secured loan, providing they have property against which to secure the loan. In fact, it may be easier for homeowners with bad credit records to be accepted for a secured loan than an unsecured loan, as providing your property as security reduces the risk involved for the lender.
Is a bad credit homeowner loan the same as a bad credit secured loan?
The two are very similar and often used interchangeably as often a bad credit secured loan is secured by the borrower’s house. However, it is possible to use other assets to secure loans, such as cars, life assurance, precious metals and financial investments. However, these are more specialist niche lending products and must be navigated carefully.
What credit score is needed for a secured loan?
There isn’t a specific credit score needed to successfully apply for a secured loan but generally speaking, the higher your credit score, the higher the chance of being approved, and possibly with a higher limit and a lower interest rate.
Do bad credit secured loans require a credit check?
Yes. Lenders will want to know your financial situation before deciding whether to lend you money. Before applying for a loan, it is a good idea to check your own credit report to see if there is room for improvement.
Can I be given an instant decision when applying for a secured loan with bad credit?
While unsecured loan decisions are often given immediately, the process tends to be longer for secured loans as lenders need to check on the asset which is being put up as collateral for the loan.
Do I need to go to a broker or can I use a direct lender?
You can choose whether to apply directly to a lender or apply via a broker. Applying through a broker might incur extra cost but a specialist broker should be able to advise you on the best deals for you and will check that you have all the correct paperwork before applying so your application won’t be held up. You will find a lot of lenders will only accept applications from a broker.
Do I have to be a homeowner to get a bad credit secured loan?
Secured lending options at NerdWallet are secured against property. Other options can include loans secured against while the other most common type of secured loans are taken out by high-value assets to guarantee the loan, such as a car, financial investments, life assurance or jewellery.
What risks are involved with taking out a bad credit secured loan?
You risk losing your home or the asset you put up as collateral for the loan if you fall behind on your monthly repayments and are unable to pay off the loan.
Why might I need a bad credit secured loan?
You might want to consolidate several debts into one loan for one monthly repayment, or move high-interest debts onto a lower interest rate.
Secured loans typically have lower interest rates than unsecured loans, so this can be a viable strategy to explore when considering how to pay off large amounts of debt.
However, when consolidating debt, you should be aware that if you increase the loan amount or extend the loan term this can cost you more in the long term.
What should I consider before taking out a secured loan with bad credit?
- How much equity you have in your home if you are using that as collateral: In order to be accepted for a bad credit secured loan, you will usually have to have built up a reasonable amount of equity in your home. Equity is the value of your home, minus any mortgage you still owe on the property. You can usually build up equity by paying off some of your mortgage or if your home’s value increases. The amount you will be able to secure through a bad credit secured loan is directly linked to the amount of equity you have in your home. Your current total financial liabilities will also be taken into account by lenders when they are working out how much you can afford to borrow.
- Making sure you can afford the repayments if interest rates increase: Unless you can opt for a fixed rate secured loan, you may face increases in your monthly repayments if the base rate rises at some point over the term of your deal. Just as you would when taking out a house purchase mortgage, you should stress test the loan to ensure that you will be able to cover the repayments even if the interest rate increases.
- Length of the loan term: Think about how long you will need to repay the loan and ensure that you will be able to take out the bad credit secured loan for the right amount of time to suit your needs.
- Amount you need to borrow: Only borrow what you really need. Secured loans cost money and the longer you are paying the loan off, the more money you will spend in interest payments.
Should I consider remortgaging instead?
It is worth researching and considering remortgaging as a means of accessing a larger amount of money when you are a homeowner. However, if your credit record has deteriorated since you initially took out your mortgage, you may struggle to access a remortgage deal with your current provider, or with a new provider as remortgage applicants have to meet the same criteria as initial mortgage applicants.
It might also be difficult to remortgage if the value of your home has fallen significantly which will affect your loan-to-value ratio.
Can I get a bad credit secured loan if I’ve been refused an unsecured loan?
Yes, because there is less risk to the lender as the loan will be secured on a high-value asset such as your home. Make sure when you apply for the initial unsecured loan you use a secured loan provider that offers a soft search eligibility check first, to see your chances of being accepted before you make a formal application, as any loan applications will show up on your credit report.
Can I get a better secured loan rate with a higher credit score?
Lenders are likely to offer better loan rates to borrowers with higher credit scores as they are seen as lower risk as they manage their debts responsibly. This is why it is worth first seeing if you can improve your credit score before applying for a loan. However, remember that it will take a few months for any improvements to show up on your credit rating.
Sarah Bridge has been writing about business and finance since 2000. She was formerly Deputy Editor, Personal Finance, The Mail on Sunday and was previously the paper's Leisure Correspondent. Read more
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