Alternatives to Secured Loans

Secured loans can be a useful way to borrow large amounts of money, especially for UK homeowners with equity in their property. However, they’re not the only option — and they’re not always the most suitable. If you’re concerned about putting your home at risk or want to explore other borrowing routes, this guide outlines the most common alternatives to secured loans and when they might be a better fit.

Why Consider Alternatives?

Secured loans come with certain advantages — such as higher borrowing limits and lower interest rates — but also significant risks. If you fail to keep up with repayments, your home may be repossessed. Alternatives may offer more flexibility, less risk, or better terms depending on your personal circumstances and borrowing needs.

1. Unsecured Personal Loans

What it is:

An unsecured loan doesn’t require any asset as security. Approval is based on your credit score, income, and affordability.

Pros:

  • No risk to your home
  • Fast approval and payout
  • Suitable for smaller borrowing (usually up to £25,000)

Cons:

  • Higher interest rates
  • Shorter repayment terms
  • Limited access for applicants with poor credit

Best for: Borrowers with good credit who want to borrow a modest amount over a shorter period.

2. Remortgaging

What it is:

Remortgaging involves switching your existing mortgage to a new one — often to release equity or reduce your interest rate.

Pros:

  • May offer lower rates than secured loans
  • Access to large borrowing via equity release
  • Streamlines your borrowing into a single mortgage

Cons:

  • Early repayment charges may apply to your current mortgage
  • Longer approval process
  • Extends your mortgage debt

Best for: Homeowners with good credit and mortgage deals that allow for equity release without large penalties.

3. Equity Release (For Over 55s)

What it is:

Equity release schemes, such as lifetime mortgages, let homeowners over 55 access the value tied up in their home without monthly repayments.

Pros:

  • No monthly repayments
  • Tax-free lump sum or regular payments
  • Stay in your home for life

Cons:

  • Reduces the value of your estate
  • May affect benefits
  • Interest rolls up and compounds

Best for: Older homeowners who need cash but don’t want regular repayments.

4. Credit Cards

What it is:

Revolving credit that allows you to borrow as needed, typically up to a fixed credit limit.

Pros:

  • Interest-free introductory periods
  • Flexibility in how and when you repay
  • No application for each use

Cons:

  • High interest if not repaid in full
  • May tempt overspending
  • Not suitable for long-term or large borrowing

Best for: Short-term, low-value expenses with a clear repayment plan.

5. Guarantor Loans

What it is:

An unsecured loan where a family member or friend agrees to repay if you can’t.

Pros:

  • Can help applicants with poor or limited credit
  • No asset needed as security

Cons:

  • Strains personal relationships if repayments are missed
  • High interest rates
  • Guarantor is legally liable

Best for: Borrowers with poor credit and a trusted support network.

6. Overdrafts or Flexible Credit Lines

What it is:

Pre-agreed overdrafts or personal credit lines with your bank.

Pros:

  • Instant access to funds
  • Only pay interest on what you use

Cons:

  • High interest rates or daily fees
  • Easy to misuse or overdraw

Best for: Managing short-term cash flow issues.

7. Peer-to-Peer (P2P) Lending

What it is:

Borrowing money from individual investors through an online platform.

Pros:

  • Competitive rates
  • Transparent terms
  • May consider wider criteria than banks

Cons:

  • Less regulated than traditional lenders
  • Limited availability for bad credit

Best for: Borrowers with decent credit seeking competitive unsecured options.

8. Local Credit Unions

What it is:

Not-for-profit financial co-operatives offering affordable loans to members.

Pros:

  • Low interest rates
  • Community-focused
  • Flexible terms

Cons:

  • Limited loan amounts
  • You may need to be a member first

Best for: Small to medium borrowing with fair terms and ethical lending.

When Is a Secured Loan Still the Best Option?

While alternatives exist, a secured loan may still be your best choice if:

  • You need to borrow £25,000 or more
  • You want to spread repayments over 5 to 25 years
  • You have poor credit but strong home equity
  • You’ve been declined for unsecured credit
  • You need a lower monthly repayment to match your budget

FCA Regulation and Consumer Protection

Whichever borrowing option you choose, always make sure the lender or broker is authorised by the Financial Conduct Authority (FCA). This ensures fair lending practices, transparent terms, and access to the Financial Ombudsman Service if things go wrong.

FAQs

Are secured loans risky?

They can be, as your home is at risk if you fail to repay. Always explore alternatives and seek advice if unsure.

What’s the safest alternative?

Unsecured loans and credit union loans are generally safer as they don’t require collateral.

Can I switch from a secured loan to another type later?

Possibly. You may be able to refinance or consolidate the debt through remortgaging or another form of credit — subject to eligibility.

Will using an alternative affect my credit?

Yes. All forms of credit can impact your score positively or negatively depending on how you manage them.

Should I speak to a broker?

Yes. An FCA-regulated broker can help you understand all available options and recommend the most suitable based on your financial goals.