What is a Secured Loan? Compare Secured Loans

Get your FREE quote

Let’s get started!

If you need to borrow money, a secured loan could be the solution to your financial problems. But what is a secured loan? Are they the right option for you? And how do you go about getting one?

Here’s everything you need to know about secured loans.

  • Simple, easy application
  • Whatever your credit history, we can help
  • Includes a free property valuation
  • No upfront fees or hidden charges
  • 5-star customer service
Get your FREE quote with our secured loan calculator

Let’s get started!

Are you a homeowner or a tenant?

Warning: Late repayments can cause you serious money problems. For help, go to moneyhelper.org.uk

What is a secured loan?

Secured loans are loans offered from a lender to a loan recipient using property, or another valuable asset, as security or collateral.

Most property put up as collateral is usually a home, so secured loans are sometimes referred to as second mortgages.

Other common names are second charge loans, homeowner loans, or further charge loans. If you hear these terms used interchangeably, don’t worry, they all refer to the same thing.

How does a secure loan work?

Secured loans follow the same application structure as you would have for any other loan:

  • You apply for the loan.
  • When/if you’re approved, terms will be set for the loan specifics.
  • Specifics often include amount, collateral requirements, monthly repayments, minimum payment, interest rate and default repercussions.
  • A monthly repayment minimum will be set. The monthly repayments will include interest. Your interest rate can be a set percentage or a variable rate, depending on the size of the loan you’re taking out.

Collateral for secured loans

When it comes to giving collateral for a secured loan, it’s important to be aware of what that means in the fine print.

In a secured loan, the collateral offered will be used as “repayment” if the secured loan is ever unpaid in the long-term.

Don’t panic – this doesn’t mean if you’re a day late on your payment you’re going to lose your house. Often there are clauses for a payment being a little tardy. For example, a late fee might be added on. Some loans incur interest on any past due amounts.

When it comes to the property put up as collateral, action on that is usually taken if you’ve fallen behind payment on the loan, or you’ve significantly defaulted.

Without repayment, your property can be repossessed to help the lender recover the cost of the funds you borrowed. If a repossession occurs, the property will be sold and the money from the sale will go to the lender to pay off your debts.

To be on the safe side and avoid any potential nasty repercussions, keep up with your due dates or even repay the loan early.

How do you apply for a secured loan?

If you’re applying for a loan where the amount is congruent with the value of your property, you’ll need to start by working out exactly what that amount is. Next, consider what you can afford to repay. Once you know, you can decide how much to request from your lender, it’s time to formally apply.

The internet has made applying for loans of all kinds especially easy and secured loans are no exception. Apply online for a secured loan with a loan broker or directly with a lender.

At Believe Money we help match you with a lender that best suits your financial needs and is likely to approve your borrowing request. Working closely with a lender that’s well versed in this financial arena can help you get approved quicker and with more favourable terms.

The loan application process is relatively straightforward, but be prepared to submit forms with personal information, home information, previous mortgage information and current income information.

How It works

Step 1.

Simple, easy application

Step 2.

We search our panel of lenders to find the deal that’s right for you

Step 3.

When you confirm your chosen deal, we get your application moving

Step 4.

The money lands in your bank
account – usually within two weeks

How much can I borrow with a secured loan?

At Believe Money, we broker loans from £1,000 to £2,500,000, depending on the value of your property and your ability to repay.

The more precise answer depends on the type of loan you’re after, your income, your credit history, your existing debts and the lender’s loan to value ratio.

Assessing your loan to value ratio will help you determine how much you can actually borrow from your loan provider. Ultimately it’s up to them, but having an idea will prevent you from over asking, which could cause immediate denial.

In terms of what a lender could approve you for, unsecured loans tend to go up to £25,000. If you need to borrow more than this – up to £100,000, then you’ll likely be looking at taking out a secured loan.

Factors like a great credit report, a high value home, or even just a well-connected broker can sometimes help you access funds that you might not otherwise reach.

If you’re attempting to get a secured loan with bad credit, it’s a good idea to prioritize lenders that work with lower credit scores.

What credit score is needed for a secured loan?

You don’t need a perfect credit score to get approved for a secured loan That’s because secured loans are backed by collateral, such as your home or car.

That said, lenders will still look at your credit history when you apply for a secured loan. They want to make sure you have a good track record of making repayments on time. If you have a poor credit score, you may still be able to get a secured loan, but you may have to pay a higher interest rate or provide a larger deposit.

Are secured loans easier to get?

Yes, they can be. Lenders see secured loans as less risky, so they’re more likely to approve borrowers with lower credit scores. You can use your home, car, or other valuable asset as security for a secured loan. The amount of money you can borrow will depend on the value of the property you put up and your affordability.

If you’re struggling to get approved for an unsecured loan, a secured loan may be a good option for you. However, it’s important to weigh the risks and benefits carefully before applying. Secured loans can be a great way to borrow money, but if you don’t repay the loan, you could put your home at risk of repossession.

Types of Secured Loans

There are several different types of secured loans available to borrowers. Common examples include:

Mortgage Loans: Also known as a second charge mortgage, these are loans secured against the equity in your property, but they’re subordinate to the first mortgage. This means that if you default on the second charge mortgage, the lender will only be able to repossess the property after the first mortgage lender has been paid off.

Auto Loans: Auto loans finance the purchase of a vehicle, with the car serving as collateral. If the borrower fails to repay the loan, the lender can repossess it.

Secured Credit Cards: These cards require a cash deposit as collateral, which becomes the credit limit for the card. If the cardholder fails to make payments, the issuer can use the deposit as repayment.

Secured Lines of Credit: Similar to secured personal loans, these credit lines require collateral, such as a savings account or a property, to secure the credit. The lender can seize the collateral if the borrower defaults.

Home Equity Loans: These loans allow homeowners to borrow against the equity they have built in their homes. The home is collateral, and failure to repay the loan may result in foreclosure.

Bridging loans: These loans are short-term loans used to finance the purchase of a new property before the borrower has sold their existing property. The bridging loan is secured against your existing property.

Guarantor loans: These loans are secured by a guarantee from another person. If the borrower defaults on the loan, the guarantor will be liable for the debt.

It’s important to note that the availability and terms of secured loans can vary depending on the lender and the borrower’s creditworthiness.

What’s the difference between a secured and unsecured loan?

Regardless of what it’s secured by, secured loans are loans guaranteed by another means to support the value of the loan.

Unsecured loans on the other hand, are sometimes called “good faith” loans. That’s because they’re usually given based on that premise; good faith.

For example, in an unsecured loan application, a lender looks for someone who has good credit, high wages and excellent credit history making them appear more likely to repay their debts.

While most secured loans share many similarities with their less secure counterparts, the main difference between the two is the collateral required.

Usually, collateral offered needs to be of a value close to that of your loan amount. But that’s not the case for all secured loans, some loans will require collateral with a value higher than your loan amount.

Learn More about Secured Loans vs Unsecured Loans

What are the advantages and disadvantages of secured loans?

Secured loans have numerous pros and cons. To help you decide whether it’s the right solution for your needs, we’ve put together a list of pros and cons. Here they are: 

Advantages of Secured Loans

  • Higher Loan Amounts: Secured loans generally allow borrowers to access higher loan amounts than unsecured loans. The collateral you offer provides security to the lender, reducing their risk.
  • Lower Interest Rates: Secured loans often have lower interest rates than unsecured ones, as the lender has collateral to lower the risks.
  • Easier Approval: Secured loans can be easier for individuals with lower credit scores or limited credit history. The collateral assures the lender, making them more willing to approve the loan even if the borrower’s credit isn’t great.
  • Longer Repayment Terms: Secured loans generally offer longer repayment terms, allowing borrowers to spread their payments over a more extended period.


Disadvantages of Secured Loans

  • Risk of Asset Loss: The primary disadvantage of secured loans is the risk of losing the collateral if the borrower defaults. If the borrower cannot make payments as agreed, the lender can seize and sell the collateral to recover their money. For example, defaulting on a secured loan against property could see it repossessed by the lender.
  • Lengthy Application Process: Secured loans often involve a more extensive application process than unsecured loans. Lenders typically require documentation and valuation of the collateral, which can prolong the approval timeline.
  • Limited Flexibility: Once an asset is pledged as collateral, its use may be restricted. For example, with a mortgage, the property cannot be sold without paying off the loan. This lack of flexibility can be a drawback for borrowers who may need to make changes related to the collateral.
  • Potential Overborrowing: The availability of larger loan amounts and longer repayment terms may tempt borrowers to take on more debt than necessary. Overborrowing can lead to financial strain and potentially put the borrower’s assets at higher risk.

Secured Loan calculator: How much can I borrow?

If you’re thinking about getting a secured loan, you’re probably wondering how much you can borrow. That’s where our secured loan calculator comes in.

Just enter a few details about your income, expenses, and the type of collateral you’re willing to offer, and our secured loan calculator will give you a FREE estimate of how much you can borrow. It’s that easy!

What should I consider before applying for a secured loan?

Secured loans shouldn’t be taken out lightly. There are several things you should consider before you submit an application.

  • Your financial ability: First things first, if you don’t have property to use as collateral, a secured loan isn’t for you. Without a means of securing the loan, there’s no reason to apply for one – it’s best to seek alternative sources of funds. Also, most approvals for secured loans require an existing mortgage. Consider the amount of the loan, your desired repayment terms and determine beforehand if your realistic repayment schedule is realistic.
  • Thoroughly assess your finances beforehand: To determine what monthly repayment you can comfortably afford, make sure you have a firm understanding of your existing outgoings and if you can afford to repay a loan. Adding in a loan repayment to your monthly budget is only a good idea if you can afford to pay it AND manage all your other debts and expenses.
  • Determine why you want the loan: Determining why you want the loan is also essential. Do you really need to borrow such a large sum of money? If you don’t need to borrow so much, it can mean you might get more favourable terms.
  • Renovating a rental home: If you’re looking for a secured loan to renovate a rental home, you can take out a larger secured loan if it’s projected that the renovations will increase the monthly profit you make from the home.
  • Be aware of your credit score and history: What does your credit score and history look like? Being aware of your credit score can give you an idea of the range you could borrow within. If you have spotless credit, you’re likely to be able to borrow more money because you’re less of a risk. That isn’t the case for most people, so it’s important to keep an eye on your credit score. Late payments, defaults and judgements will show on your credit score, even if they’re not from this year. Having any of these—especially in excess—can cause lenders to turn you down or dish out an unfavorable interest rate.
  • Interest rates at the end of the term: When searching for a secured loan, ask your broker to provide each lender’s standard variable rate so you have an idea of interest rates at the end of your terms.

What are the alternatives to a secured loan?

Even without perfect credit or a large borrowing amount, there are still alternative options to secured loans.

Credit cards

A credit card might not only be more feasible than a secured loan, it might be preferable. Depending on the amount you’d like to borrow and what you’d like to do financially, a loan might not make the most sense.

There are credit cards available to many demographics, including people with poor credit and people looking to get high credit limits. Many banks have both secured and unsecured credit card options. Some also come with appealing interest free periods.

Unsecured loans

It’s possible you may be able to get a loan without putting up any collateral. If the amount you’d like to borrow is low or you have acceptable credit, it might be worth applying for an unsecured loan.

Most lending sites allow for pre-approvals to be carried out that can tell you ahead of time if it’ll be possible for them to approve your application or not.

Let Believe Money help you get a secured loan

If want to apply for a secured loan, let Believe Money assist you. As a credit broker, not a lender, we search a panel of appropriate leading lenders to find you the best loan to meet your needs.

We have access to hundreds of products, with lots of different options, to get you the secured loan that will work for you.

Bad credit score? Not to worry, CCJs or defaults? We might still be able to help. Our advisors are on hand to help you find the most suitable option for you.

Our process is simple and easy – we search multiple highly rated lenders to get you the best deal. An initial match won’t incur any hidden broker fees or charges, nor will it impact your credit score.

Contact us today to request a quote.

Why Use Believe Money?

Believe Money is an award-winning finance broker dedicated to offering the best range of affordable loan options. Whatever your circumstances or credit rating, we’re committed to getting you the best secured loan interest rates by searching our entire panel of secured loan providers.

Whatever you need a secured loan for, we’re here to help. Our specialist advisors are available Monday to Friday, so if you need any help please contact us online or give us a call on 01302 591 360.


Do I need a credit check for a secured loan?

While lenders don’t rely on your credit alone, they perform credit checks to get an idea of your score. A good credit history shows you’re a responsible borrower, so lenders might offer better interest rates.

Does a secured loan affect your credit rating?

Yes, a secured loan can affect your credit rating because lenders use it to assess your ability to repay debt and your overall financial responsibility.

When you take out a secured loan, you’re entering into a binding agreement with a lender and will have to make regular repayments. 

If you make these repayments on time, it will increase your credit score. However, failing to do so, or even losing your house, will negatively impact it.

What are the average secured loan interest rates?

There’s no set interest rate for secured loans, with most falling between 2% to 10%. The rates you’re offered depend on numerous factors, but it’s best to check with the lender before signing an agreement.

We compare loans from our panel of the UK’s top lenders to get you the best deal.


Contact Us

Mon – Thursday 9am – 7:30pm

Friday 9am – 3pm

Call from a mobile or Landline:

01302 591 360