What is a Secured Loan?

Secured loans are also known as 2nd charge mortgages. They are a great way to raise funds if you have equity in your home and you have an existing mortgage.

Secured loans are not available to people who own their home outright. In this case a re-mortgage would be used to raise funds.

How a secured loan works

A secured loan is exactly as it sounds. The borrowing is secured against a property asset.

Because the property is used as security, a secured loan often allows borrowing of a higher amount and at a much lower interest rate than unsecured lending.

Even with a poor credit rating & recent self-employment or new employment, a secured loan could still be used to take advantage of competitive interest rates.

A secured loan may even be able to help when you have been declined additional borrowing by your existing mortgage lender due to insufficient income. This is because most lenders calculate the maximum borrowing available to you based on a higher income multiple, sometimes up to 7 times your income.

Secured lending also offers longer repayment plans, sometimes 25 years or more. This will provide a low interest loan and a repayment plan to suit.
Loan amounts vary considerably, but some lenders will offer loans starting from £5000. The amount available to borrow will be determined by several factors such as the equity available in the property, credit status and income. All of these factors are more flexible with a second charge secured loan than they would be with a first charge mortgage.

A secured loan is used for many reasons such as to fund home improvements, buy a new car, building an extension, business purposes or consolidating debts.

As with any secured loan, including standard mortgages, if you fail to meet repayment dates, there is a possibility of the security being repossessed. For this reason, it is very important to speak with an independent broker to get impartial advice before taking out a secured loan.