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Secured Loan

A secured loan is where you secure the loan against a major asset such as your home. They are cheaper than unsecured loans but if you miss any payments you risk losing your home. Secured loans are commonly used when borrowing large sums of money over a long period of time.

To arrange a secured loan you will be required to offer some collateral as security for the moneylender. Collateral does come in various forms but the most common is your home, or other property. You do not have to own your home or property outright to secure the loan. You just need enough free equity. It is also possible to have more than one loan or mortgage secured on your property.

This secured loan provides lenders with a safety net. If borrowers fail to keep up with their agreed repayments a loan company can reclaim the property as compensation. This is why it is common for borrowers to shy away from secured loans, the risk of losing their home or property being too great.

However, secured loans do offer a number of benefits. The APR (annual percentage rate) is generally lower than on unsecured loans, they feature more flexibility as far as repayment plans and terms go and are usually far easier to obtain. Unsecured loans are only normally given to consumers with excellent or good credit records, while secured loans are generally available to anyone who has the right collateral.

Most loans are repaid through monthly instalments. Flexible loans, where you can borrow and pay back at will, are becoming a lot more common but the interest rate charged is often significantly higher. When deciding between a secured loan and unsecured loan it is worth remembering that while unsecured loans are not tied to a house or property penalties for non-repayment will still be incurred.

It will take longer to organise a secured loan as your home may need to be valued. But also the lender may be a bit more lenient with you should you run into short term payment difficulties as they know they have some security to fall back on.

These are sometimes called secured loans, because they are secured on your property, like your mortgage.
Secured loans are usually for larger loan amounts (from £5000 upwards), and this type of loan is usually cheaper, as you are providing security (your property).

The repayment periods for secured loans are longer (up to a maximum of 25 years depending on loan size and affordability).
Secured loans usually offer a much more flexible approach to credit difficulties, and can be used to consolidate credit cards and other loans into a new loan with an affordable monthly repayment.

Please note these articles do not constitute regulated financial advice, which recommends a course of action based upon the specifics of your personal circumstances. These articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances.