What is a secured loan?

A secured loan, sometimes referred to as a “homeowner loan”, is where the debt is linked to and secured against an asset that you own, usually the borrower’s property. These are often used to borrow large amounts of money, usually over £10,000 however anything from £5,000 and above is available to borrow.

With secured loans, the amount you can borrow, the duration of the loan and the interest rate you are offered is all depending on personal circumstances and the value of “free equity” in the property. The free equity is the difference between the value of your home and the amount owed on the mortgage, if one is owned. The interest rates tend to be cheaper than with unsecured, personal loans however it can come with several more risks.

The term “secured” simply refers to the fact that the lender will require something as security for payment, just in case the loan cannot be paid back. In a sense, this acts as a guarantee for the lender that the loan will be repaid either way and can be considered as a major risk for those who have taken it out. However, as long as the borrower keeps up with repayments, secured loans can act as a slightly cheaper way of gaining a lump sum of money from a lender.