Secured Loans

What is a Secured Loan?

A secured loan is a sum of money lent by a financial institution that has been secured against the property of the borrower. By securing your property, the lending body has a way of guaranteeing that their money will be repaid to them. This is usually the borrowers home, or their car. A secured loan gives people the opportunity to borrow a large sum of money over a long period of time.

More money can be borrowed with a secured loan than with an unsecured loan. An unsecured loan cannot be obtained for sums greater than £25,000, whereas customers can borrow up to around £75,000 with a secured loan. Secured loans also offer much longer payment terms and customers can repay their loans between three and twenty-five years.

What does a Secured Loan have to offer?

Secured loans generally offer customers lower APR (Annual Percentage Rate) over a longer period. If you are looking to consolidate your existing debts, this could mean lower monthly repayments, and free up your finances. The longer repayment schedule will mean that you may remain in debt longer than with other finance products. When looking for a secured loan, look at the TAR (Total Amount Repayable) of your loan - longer repayment schedules may give you a lower APR, but will it cost you more in the long-run?

It must be remembered however that failure to keep up repayments on a secured loan buts your property in jeopardy, and that the lender is entitled to sell your property to reclaim your outstanding debt. You may be faced with visits from bailiffs, receive CCJs or negatively affect your credit rating. More importantly, your home may have been given as surety for your loan, so you may face the risk of your home being repossessed. If you do decided to apply for a secured loan, be sure to apply with a well-known lender with a good reputation to protect yourself from unscrupulous lenders.

Watch out for any costs or punitive charges that may be hidden in the small print. Be wary of the PPI (Payment Protection Insurance) offered by the lender. PPI offers customers insurance against falling behind on payments if you were to become ill, lose your job, or have an accident. If this were to happen, the lender will meet the payments on your loan for you. Lenders tend to overcharge customers for this. If you would like to insure yourself, it could be significantly cheaper to search the market for the best deal.