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What is a secured loan?
Loan jargon can be confusing. When you have personal, homeowner, secured, unsecured, debt consolidation, payday and bad credit loans, it’s easy for things to get a bit overwhelming. But that’s why we’re here - to bust the jargon and make things easier to understand.
A secured loan is the same as a homeowner loan, and you can only get one if you own a property. The ‘secured’ part comes from the fact that the lender uses your property as security for the loan.
Secured against your home
It’s all well and good us saying things like: “A secured loan is secured against your home,” or that: “Your property is used as security.” But what does this actually mean?
Well, let’s break it down further. When you take out a secured loan, you’re agreeing to repay what you borrow in set monthly payments. If you fall behind on these repayments, your lender will start getting worried about whether they will get the money you borrowed back. Having the loan secured against your property means that, in a worst-case scenario, the lender can use your home to raise the cash you owe.
Your lender should always try to help you if you start to fall behind with your repayments, but only if you stay in touch with them and keep them updated. If there’s no contact from you, or you’re unable to come to an different agreement, unfortunately this can mean you lose your home. The lender will sell your home and use the cash raised from it to pay off what you borrowed. This is why it’s vital to keep in touch with your lender and speak to someone as soon as you think you might be falling behind.
How much your home is worth and the portion of it that isn’t mortgaged (the equity) will affect how much you’re able to borrow with a secured loan. The more equity you have, the more a lender is likely to offer you with a secured loan.
What it’s for
A secured loan can be used for pretty much anything. The amount you’re able to borrow will vary based on your home’s value and the equity you have, but it’s typically much more than a personal loan.
Some of the most common uses for a secured loan include things like home improvements, buying a new car or debt consolidation.
If you’ve struggled with credit in the past, you might have more luck applying for a secured loan than a personal loan, as your home acts as security. But like with any borrowing, it’s important you look at how much money you have coming in and going out every month to see if you have room for a loan repayment.
Ocean secured loans range from £10,000 to £250,000, and we compare hundreds of loans from different lenders to find the right deal for you. Plus, you can now check whether you’ll be accepted for a loan before you apply with our new Smart Search feature.