What is a secure loan?
A secure loan is a loan offered by lenders who will secure the money they are lending you against an asset you own, just in case you fail to pay back the loan.
A secure loan is generally a loan for a large amount of money, usually between £7,500 and £100,000, which is repaid over a number of years. To take out a secure loan you must have an asset to secure the loan against. This is usually equity in your home, but can be a car, a painting or piece of artwork, or even jewellery. Lenders may consider anything, so it’s always worth asking if you are unsure.
How does a secure loan work?
When you take out a secure loan, the lender will lend the customer money, which they then secure against an asset of the customers. If the customer then fails to pay back the loan, the lender can legally repossess that item, to recoup their loan, and any costs.
Most secure loans are taken out against equity in a home, so borrowers should be aware that failure to repay their secure loan could lead to repossession of their home.
What do people take out secure loans for?
A customer may take out a secure loan for any number of reasons, although home improvements, debt consolidation or a new car or holiday are common reasons for taking out a secure loan, otherwise known as a secured loan, or secured homeowner loan.
Home improvements are currently the most common reason for taking out a secure loan, because the housing market is so flat, and people are unable to move home. A secured loan can pay for a garage or loft conversion, new conservatory, or an extension, increasing the amount of space a homeowner has to live in, and increasing the value of the home at the same time.
Debt consolidation is another popular use of a secure loan, as credit cards, store cards and other loans generally have much higher interest rates than a secured loan. A secure loan has lower interest rates because there is less risk to a lender, as they have an asset as security should you fail to repay the loan, effectively ensuring they will not lose out on their investment.
Whilst home improvement and debt consolidation are the most popular uses for a secured loan, there is no limit to what you can use the money for.