What is secured borrowing?
Secured borrowing involves taking out a loan by securing it against equity. What is equity in a property? It's simply the amount of the property that you own outright (that doesn’t have a mortgage attached to it). This means that if you stop making repayments on the loan (and the lender has chased you sufficiently), your home could get repossessed to pay the remaining balance.
Why should I choose a secured loan?
- Interest rates are generally lower than on unsecured loans – as secured borrowing is considered to be less risky for the lender. However, you risk losing your home if you stop making the repayments.
- You may get access to a large amount of cash up to around £100,000. This depends on the lender and your eligibility.
- You can spread the repayments over a longer period - so the monthly repayments can be more affordable. But having a longer loan period means you may pay more interest overall. And you need to consider if your financial circumstances are going to change in the future.
- You may find it easier to get accepted, even if you have bad credit. This is because you’re using an asset as collateral, which reduces the risk from the lender’s point of view.
- You can use a secured loan to consolidate debt if you have multiple debts. This will combine your debt into a single monthly repayment to one lender.
What is the minimum amount for a secured loan?
With secured loans can usually borrow a larger amount than with an unsecured personal loan. Providers may lend upwards of £10,000.
How much can you borrow against your house?
The usual upper limit for a secured loan is around £100,000 (but it can be more depending on the lender). There are five main factors that contribute to how much you can realistically borrow:
If you have a mortgage, you may be able to borrow against the value of your home’s equity. This is worked out as how much is left when you deduct your outstanding mortgage balance from the value of your property.
2. Credit history
It’s likely that you’ll be able to access more cash (and at a better interest rate) if you have good credit. Negative footprints on your credit history, like a CCJ or even missed repayments from previous debt, will make the provider wary about lending to you. They may offer you less cash, a higher interest rate or even decline your application.
Tip: Use an eligibility checker before you apply for a secured loan to see whether you’re likely to get accepted before you apply without marking your credit history.
How much you earn and whether you have a stable income will play a factor, too. If you have a large income, chances are you’ll be able to borrow more. But if the amount you earn differs each month, the lender may worry that you won’t be able to afford the repayments in the future.
4. Personal information
The lender will also take your personal information into account when deciding how much to offer you. Your financial history and address history are used to work out how much of a risk it is to lend to you. For example, if you’ve lived at the same address for five years and are registered on the electoral roll, they know you have a stable address, and they can contact you easily. This means they may offer you a better deal.
Affordability is a factor in how much you can borrow. The lender will compare how much you earn against your fixed monthly costs (mortgage, bills, etc) and variable monthly costs (food, shopping, etc). They’ll also consider any other debt you currently have. This information is used to work out your affordability (i.e., how much spare cash you have left over to spend on a secured loan after your other repayments).
How much can I afford to borrow?
You can use a loan calculator to estimate your affordability online. This will give you a good idea of how much it’ll cost you to pay back each month – based on how much you want to borrow, for how long and the Annual Percentage Rate (APRC).
How can I find the best secured loan?
There are a few ways you can search for a secured loan – it’s best to use a combination of all of them in order to find the best deal for you.
- Contact the lender directly – either online, over the phone or in-store
- Use comparison websites – these compare deals across the market (but may not include the whole of the market)
- Speak to a broker – they’ll search their portfolio of lenders for a deal they think will suit you
- Look at the annual percentage rate (APRC) – this relates to the total cost of borrowing
- Use an eligibility checker – this will tell you if you have a good chance of getting accepted before you apply, without impacting your credit score
Secured Loans from £10,000 to £100,000
- Check if you’re eligible before you apply
- We compare 100s of secured loans
- Getting a secured loan quote won’t affect your credit score
We have found loans with rates from 2.3% to 27% which has allowed us to help customers with a range of credit profiles. Representative Example: If you borrow £19,400 over 7 years, initially on a fixed rate for 5 years at 4.55% and for the remaining 2 years on the lender's standard variable rate of 5.50%, you would make 60 monthly payments of £313.60 and 24 monthly payments of £316.65. The total amount of credit is £22,523; the total repayable would be £26,415.60 (this includes a Lender fee of £795 and a Broker fee of £2,328). The overall cost for comparison is 9.6% APRC representative. This means 51% or more of customers receive this rate or better.