What are UK secured loans?
UK secured loans are a form of loan offered to customers in the UK which are secured against an asset owned by the borrower. This asset is usually equity owned in a home, but can also be another asset, such as a car, painting, jewellery or other artwork.
UK secured loans will commonly charge less interest than a standard unsecured loan as the lender has less of a risk, as they have your asset secured against the loan. Typically a UK secured loan is for amounts above £7,500, the general limit for a standard unsecured loan.
How do UK secured loans work?
UK secured loans are actually very simple, and a potential borrower will need to work out how much they can borrow, based on how much they have in assets to leverage against their loan.
The most common asset leveraged against a loan is equity in the home. To work out how much equity you own in your home you simply need to deduct the outstanding value of your mortgage from the value of your home. The remaining value is the equity you own in your home and is generally how much you can borrow.
If you find that you have a negative figure remaining, then you are said to be in negative equity and you may not be able to take out a secured loan against your home.
Other assets will need to be approved by the banks, but UK secured loans against cars, paintings or jewellery are possible.
Why do people take out UK secured loans?
There are many reasons for people to take out UK secured loans, with one of the most common reasons being to make improvements to a home. UK secured loans are ideal for customers who wish to convert a garage of loft space to create an extra room, or to add an extension or conservatory onto their home.
Other people take out UK secured loans to help pay off more expensive debts, like credit cards and store cards, and these customers often find that the interest rate charges on UK secured loans is far less than the interest rate charged on many credit cards.
Other uses of UK secured loans are not limited, but people may use them to fund a car purchase, or to pay for a once in a lifetime family holiday.