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At Believe loans, we work closely with a wide selection of lenders to help you get access to the right large secured loans to suit your needs, even if you have a bad credit report.
But what actually is a large secured loan? And how does it differ to personal loans or unsecured loans? Or what if you need to borrow larger sums than an unsecured personal loan provides, or you have bad credit, can you still take out a secured loan?
Let’s dive into the differences between a secured and unsecured loan, and find out which is better suited for your needs.
Difference between a large secured loan and large unsecured loan
The most notable difference between these two types of loans is that a large secured loan is a much larger sum than a large unsecured loan.
This is owing to the fact the lenders are more likely to provide a larger amount when the loan is secured by collateral.
To help understand, we will go through the main differences between these two popular types of loans below.
What is a secured loan
Secured loans are those that require collateral in order to protect the lender against borrowers defaulting. You can take out a secured loan for any purpose, but most people use them for home improvements, property or vehicle purchases, or refinancing.
If you wish to borrow money this way, you will need to offer up collateral in order for the loan lender to secure the loan against. This is why the rates with secured loans are usually better than with unsecured loans, because the lender has the ability to repossess whatever you used to secure the loan if you default on your payments.
In some cases, the collateral can be a vehicle, antiques, cash savings, artwork, or anything else of value. However, in most cases secured loans are secured with a property, a fact that lends to their very oft used nickname of homeowner loans.
Remember, there are significant risks involved when taking out a secured loan. If you don’t pay back the entire amount of the loan by its due date, your lender might take possession of your property — which means they can sell it and use the sale proceeds to pay off the balance owed on the loan (not including any fees).
What is an unsecured loan
Unsecured loans come with less risk to the borrower, as they are not “secured” by something that you own in the form of collateral.
If you’re looking at taking out a loan of any form, you should determine whether an unsecured loan might work for you first.
Unsecured loans come with higher interest rates than secured loan rates. This is because the lender is taking a bigger risk that you won’t be able to pay them back the funds borrowed, and they won’t have anything available with which to regain their funds.
Less money is typically available through an unsecured loan. This is because with a secured loan, the lender will often be willing to lend somewhere near the region in value of what you are securing the loan with.
Unsecured loans also often come with higher interest rates and are dependent on the borrower’s credit rating.
Secured personal loans
These are usually designed for people who want to borrow between £5,000 and £25,000. The interest rate is often fixed for five years or longer and you can pay it back monthly or weekly.
These are typically used for smaller amounts (usually between £1,500 and £7,500) but they’re more flexible than secured personal loans because you can choose an interest rate type (such as fixed or variable) and repayment period (monthly or weekly). You don’t need any collateral but you’ll still need to pass a credit check.
What constitutes a large secured loan
The reason why it’s important to define what makes a large secured loan large is because there are many different types of secured loans out there and they don’t all have the same requirements.
There are no fixed numbers for defining what constitutes a large secured loan. The size of the loan depends on the value of the asset and the borrower’s financial strength.
One loan provider might see £30,000 as a large secured loan, whereas another might see £150,000. These figures are dependent on the specific provider and can change from institution to institution, so it might be worth seeking advice from somebody who is not a lender to understand what is a realistically large figure for your investment requirements.
A very general rule of thumb (depending on many factors) is that you can often borrow up to 90% of the value of your asset, so if you have a £100,000 car to put up as collateral, you’ll be able to borrow up to £90,000 against it. Bear in mind that this is a ballpark figure and will vary greatly depending on your loan provider.
Reasons you might need a large secured loan
There are a variety of reasons that someone might need to apply for a secured loan, in this case, a large secure loan. This type of loan is often the best way to borrow money when needing a large amount when you have collateral and safety in your income, so it makes sense that it is very popular.
Here are some of the reasons that we’ve seen:
Using a large secured loan for home improvements
Probably the most common reason that we hear from people applying for these types of loans are for home improvements, which are naturally very costly endeavours.
Home improvements can range from just redecorating to actually increasing the size of your property, for example with a loft extension or building a garage, which will often increase the value of the property overall. However, it isn’t always easy to get enough money for these improvements, and even with tight budgeting these works often go over budget.
Let’s say for example a loft extension that adds a further bedroom and bathroom to your property costs £50,000 in architect and building fees, but increases the value by £70,000, then it is a sound financial investment.
That’s where a large secured loan would come in to help you be able to put up the money to earn back more, even taking into account the lender fee and interest rate.
Using a large secured loan for a second home
Probably the second most popular use for a large secured loan is to help with buying another property. Of course, for some landlords this could be a third, fourth or tenth property, but for most people this will most likely be a second home.
With the constantly increasing prices of rent in the UK, a second home can be a great source of income, but is obviously a huge investment to have to consider, let alone to undertake. A deposit can be anywhere between 10 and 30 percent of the overall cost of the property, so by no means a small amount of money to have to find.
One way to do this is to speak to your mortgage lender about renegotiating your existing mortgage, in order to raise the funds for the deposit or down-payment on the second home. However this option is not available to everyone, and might not provide enough funds for what you require in this endeavour.
Unlike remortgaging, taking out a large secured loan or homeowner loan is generally unaffected by bad credit or personal circumstances, so long as you have enough collateral to secure your loan against.
For this reason, a large secured loan can be a great way to raise the funds for a second home deposit, but you should check with an independent financial adviser first to see if this is the right option for you.
Taking out a large secured loan for buying a vehicle when you have bad credit
In a similar vein to raising capital for the deposit on a second home, a large secured loan can be an option for people who want to buy a car but have bad credit. If you have bad credit or no credit at all, it can be difficult to get an auto loan from traditional lenders like banks or credit unions.
In these cases, buying used cars through independent dealerships can be an option — but only if you can come up with enough money for a down payment on your own. And even then, many dealerships won’t allow customers to finance their entire purchase unless they have good or excellent credit scores.
If this sounds familiar to you, then a large secured loan might be the best option to help you get the vehicle you need. Often this too is an investment that will pay back dividends, for example a vehicle needed to start a new job like a delivery driver or courier.
Taking out a secured loan for debt consolidation
The final suggestion that we will list here as a popular reason is debt consolidation. If you have multiple credit cards with high interest rates, paying off those loans (or other debts) with a single new one could save money in the long run.
If you have a large amount of debt and you’re struggling to pay it, a large secured loan could help you to pay off some of your debts and reduce the stress that comes with having multiple creditors chasing after you. This will give you more time to find a way to repay the money, as well as reducing your monthly payment.
It is important at this point to note that making the decision to get a secured loan should not be taken lightly, and your own financial situation should be taken into account.
Make sure to seek professional advice from an external party that is not a lender before making the decision to take out a secured loan in any capacity, because getting into more debt is the opposite of what we are trying to achieve here.
Which large secured loan should I choose
Most secured loans will come with relatively similar terms from their providers, but these will all have different nuances so it is worth shopping around to compare secured loans.
When you compare loans, there are certain things to look out for to help influence your decision of who to go with.
Firstly, the loan-to-value ratio is of utmost importance. This determines how much money you can borrow, as it is what the lender uses to work out what your collateral translates to in monetary value for the loan.
Secondly, the interest rate is the percentage that you will pay on top of the actual figure that you borrowed. A large secured loan (or any loan for that fact) will usually be set with an annual interest rate, often locked in for a number of years.
The higher the interest rates are, the more interest the lenders are expecting you to pay back in your monthly repayments. Bear in mind that these interest rates can be variable, so do your research if you are looking to take out a loan for a longer period.
Another thing to look out for are the fees involved besides the monthly payments. For example, you might have fees involved when repaying a secured loan early, called early repayment charges.
Then there is the lender fee or broker fee, which will vary from provider to provider. We advise borrowers to take all of these figures into account and calculate the total loan fees before taking out a loan.
Taking out a large secured loan
So if you’re looking to find a secured loan, you’ll want to have worked out the total secured loans cost in advance. Your collateral will be at risk, so these aren’t decisions to be taken lightly. Finding the best secured loan for you will take time and perseverance, but don’t give up if it gets a bit tedious.
We’re experts in secured loans, so we can help walk you through all of the calculations and breakdown the costs with you step by step.
If you would like to compare loans, feel free to get in touch with our friendly team to see how we can help you. We’ll be able to provide you with a free breakdown of costs and options available to you, helping you with taking out a large secured loan to kick start your investment plans.
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