Secured Loans

Secured loans are only available to property owners, or those with a mortgage, and allow the lender to force you to sell your home if you can’t repay your debt (therefore the ‘secured’ aspect is to the benefit of the lender, not the borrower).

In the main, personal loans from a bank or building society are unsecured however it is still possible for your home repossessed via a ‘charging order’ if you can’t repay. To help decipher the complexity, Simple Financial Solutions can offer expert advice on all types of loans and suggest which may be right for you. For example, you may want a secured loan as:

  • It is easier to get one: Unsecured loans are usually cheaper if you have a decent credit score, however given their added security lenders are more willing to lend if you have a poor credit score.
  • You can borrow large amounts: The maximum secured loan is £75,000 compared to £25,000 for unsecured.
  • You can borrow over a longer period: Due to large set-up costs, lenders prefer loans to last longer (five to 20 years, for example, compared to one to seven years for unsecured). While this means monthly repayments are smaller you can expect to pay a lot more in interest in the long-term

The cheap and safe way of getting a secured loan

Extreme care must be taken when taking out any loan, particularly a secured one. Simple Financial Solutions can help you to better understand your debt situation from the outset – if a secured loan isn’t essential, then why get one? Secured loan rates are usually variable so your monthly repayments may change in line with the Bank of England base rate or under the instruction of the lender – check the small print before you proceed with an application. If you wanted to switch from a fixed rate debt to a variable rate debt consider whether you’d be able to afford repayments if they suddenly increased. Also find out whether there are penalties for paying off the debt early as these are common with unsecured loans.

The cost of an unsecured loan

This interest rate varies depending on the size of the loan, duration, your credit score and the ‘free equity' in your home, however how these are assessed is different from lender to lender. Your credit score depends on income, outstanding debt, arrears, defaults, court action or bankruptcy. 

‘Free equity' is a property's value minus the amount owed on it (the bigger the difference, the better rate you'll be offered). Additionally, Payment Protection Insurance (PPI) is an optional policy that will cover your loan repayments if you are unable to due to sickness or unemployment. PPI has been in the news recently thanks to widespread mis-selling however lenders have been forced to clean up their act so you should be able to make an informed decision whether you can afford the additional costs on top of your loan repayment.

So what now?

Please note: Simple Financial Solutions does not provide any assistance for Loans of any type at this time, these pages are for information only. Please check back soon.

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