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Secured loan

A secured loan is when you borrow against an asset.

You offer as collateral an item of value to the lender and this is normally your house or your car. The lender will determine the value of the loan and the interest rate based factors such as your credit score, the value of the collateral offered, and your overall debt load.

A secured loan is usually for larger sized loans borrowed over longer periods for purposes such as home improvements or buying a car. The risk to borrowers of secured loans is that you can lose the property you have put up as security. However the advantage of a secured loan is that you can borrow more money and repay it over a longer period and you can use the loan for practically anything as long as you have put down a security on the loan already.

In general secured loans are easier and faster to obtain than unsecured loans. Loans up to £25,000 are subject to the Consumer Credit Act (1974) and you are entitled to 7 days to pull out of the agreement after signing the contract.

Secured loans can be an attractive option for people with adverse credit histories who perhaps need to re-organise their debts by releasing equity held in their homes.