Secured Loans Explained
Sometimes called a “home-owner loan” or “secured home-owner loan”, you’re able to get a secured loan if you’ve got an asset that a loan can be secured against – this is usually a house. A secured loan is a kind of personal loan that’s secured against your property, and so if you’re a home-owner you’ve got a much better chance of getting one, because the lenders are taking less of a risk as the loan is secured. You can get secured loans from a lender directly, or by using a credit broker, who can advise on the loans available to you.
The best thing about this kind of loan, is that because lenders have the security of your asset, they might be able to give you a better repayment rate, meaning that your monthly repayments might be lower. What’s more, it’s also a good option if you’ve got a bad credit rating, and have found it tricky to get a loan in the past.
Let’s take a look at some of the most asked questions about secured loans:
What are the advantages of a secured loan?
A secured loan can offer:
- Lower interest rates – as the loan is secured against your property, it’s less risk for the lender.
- Chance of finance even when an unsecured loan has been refused – your credit file will still be checked, but if you’ve got a poor credit score then a lender might feel this is less important as they’ve got the security of your home.
- A good range when it comes to loan amounts – you can sometimes borrow a large amount over a longer loan term – sometimes up to £500,000.
What could I spend the loan on?
A secured loan is a kind of personal loan, so what you spend your money on is, well – personal. It’s yours for the spending, from home improvements to a dream holiday, so long as you keep up with your monthly repayments, the rest is up to you.
How much will I be able to borrow?
The amount you can borrow will depend on several things, but if you’re looking to borrow a large amount, a secured loan could well be your best option as they’re for typically between £10,000 and £500,000, so more than you’d tend to easily be able to get on credit cards for instance.
How will I pay off the loan?
The loan will usually be paid off as monthly repayments, and the cost of these will depend on the loan amount, and the loan term (the time period you’ve got the loan over).
What if I’ve got a bad credit rating?
If your credit score is far from ideal, a secured loan might be just the ticket. As the lender knows they’ve got the security of your home against the loan, they’re more likely to lend, even with a bad credit rating. At Better Chance Finance we work with lots of trusted lenders, and some of them specialise in finding the best loans for people who have a bad credit rating, so even if you’ve ever found yourself in any of the following situations, we might still be able to help:
- Poor credit score
- Making payments late
- Had a mortgage in arrears
- Defaulted on payment
- Been on a debt management plans
- Faced bankruptcy
- Had a home repossessed
Will I have to pay interest?
As with almost any loan, you’ll have to pay interest, and this is included in your monthly repayments. The interest rate you’ll get will depend on several factors – including your personal situation, and the lender you borrow from. At Better Chance Finance we can act as a credit broker, helping you to find the best rate.
Is it risky to take out debts against your home?
Let’s be clear, there are definitely risks when you take out any debts against your home. Remember, this loan is secured against your property, and this means that if you fail to pay your monthly repayments, and you continue not to pay, your home can be repossessed. Any money made from the sale of the property will be used to pay your mortgage and your secured loan. If the money made on the sale isn’t enough to cover your mortgage and the loan, you might have to declare bankruptcy.