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A secured loan, or homeowner loan, is a large loan only available to homeowners. The loan is linked to your property, meaning your home may be repossessed if you cannot make the repayments. However, it also means the interest rates will be quite competitive compared to an unsecured loan.

You can usually borrow up to your property’s equity. Equity is the proportion of your home that you own outright, free from any mortgage, such as your initial deposit and however much of your mortgage you have already paid back. At Loan.co.uk, we offer secured loans from £10,000 up to £10 million. It is uncommon to find a lender willing to lend outside of that range. Our repayment terms last from 2 to 35 years.

A secured loan can be used for almost anything. Most people use them to make home improvements or to consolidate debt. They can also pay for things such as a new car, an exotic holiday or a dream wedding.

Because the loan is secured against your home, the lender will see it as less risky than an unsecured loan. This means you can expect larger loans, longer repayment terms and lower interest rates.

Many secured loans are taken out to consolidate debt. This means taking out a single large loan to repay multiple smaller, pre-existing debts. This way you pay off the debt with a single, simple, monthly repayment. By paying off high-interest debt (like credit card debt), with a low-interest loan (like a homeowner loan), you can save money over the long term.

You should consider your:

• How long will you need to spread the repayments over?
• Current equity. How much money will you be able to borrow?
• Credit history. What interest rates will you be offered?
• Existing debts. What else will you need to repay?
• Some lenders have eligibility criteria that you will have to meet. For example, being a UK resident for at least 3 years or being within a certain age range.

Secondly, you should consider what type of secured loan you want:

• Short-term fixed rate secured loan. The interest rate is fixed for a predefined period, typically a few years, so you will always know how much you will have to pay each month. Once the fixed rate term ends you will be automatically transferred to a variable rate loan.
• Fixed for term secured loan. Similar to the short-term loan, except this loan’s interest rates are fixed for the entire term of the loan.
• Variable rate loan. The interest rate may fluctuate depending on the state of the market, the choices of the lender, and the Bank of England base rate. Because the interest rate isn’t fixed, it may appear lower when you apply. But it can increase, and it most likely will.

Alternatives to secured loans

Perhaps a secured loan isn’t the right loan for you. Here are some possible alternatives:

• Unsecured loan. You might be able to find an unsecured loan with a good interest rate to suit your needs. It’s unlikely you’ll be able to borrow as much as with a secured loan, but there’s no possibility of repossession.
• This can free up a lot of cash if you have a lot of equity. However, you will probably be paying interest for a longer period of time. It may not be the best option if you’re already satisfied with your current mortgage deal.
• Equity release. This option is only available if you are over 55. With equity release a lump sum is paid by the lender who, in return, takes possession of a percentage of your home, and get their money back when your house is sold or when you die.

Bad credit may mean you will be offered higher interest rates. Here at Loan.co.uk we will try to find you a loan even if you have bad credit. Because the loan is secured to your home, lenders will still have some assurance that they will get their money back.

You can pay off your loan early, but some lenders may issue a penalty for early payments because they will not be collecting the interest they expected. Take this into account when speaking to a loan broker, like Loan.co.uk, about potential lenders.

If you cannot repay the loan, contact your lender immediately. They may be able to sort out an alternative payment plan. If you remain unable to make repayments your home may be repossessed. Be certain that you’ll be able to afford the repayments before taking out the loan.