What Is a Secured Loan?
A secured loan is a type of borrowing that uses an asset — usually your home — as collateral. In the UK, these are often called homeowner loans. They allow you to borrow larger amounts over longer terms, typically at lower interest rates than unsecured loans. This guide explains how secured loans work, who they’re for, and the key points to consider before applying.
How Does a Secured Loan Work?
A secured loan is linked to your property. The lender uses the equity in your home as security for the loan. If you fail to keep up with repayments, the lender may have the legal right to repossess your property. The amount you can borrow depends on your available equity, income, credit history, and the lender’s affordability checks.
What Can Secured Loans Be Used For?
Secured loans are commonly used for significant expenses that require larger sums or longer repayment periods.
Common uses include:
- Home improvements or renovations
- Consolidating existing debts
- Funding weddings, education, or medical treatment
- Purchasing vehicles or caravans
- Business investments or one-off large purchases
Loan amounts typically range from £10,000 to £500,000 depending on your financial situation and the lender’s criteria.
Secured Loans vs Unsecured Loans
Key differences:
| Feature | Secured Loan | Unsecured Loan |
|---|---|---|
| Backed by property | Yes | No |
| Loan amount | Higher | Lower |
| Interest rate | Usually lower | Usually higher |
| Repayment term | Up to 25 years | Up to 7 years |
| Risk | Property at risk if unpaid | No asset risk |
Secured loans offer more flexibility and lower rates, but they carry the serious risk of losing your home if you don’t repay as agreed.
Who Is Eligible for a Secured Loan?
To apply for a secured loan in the UK, you typically need to meet the following criteria:
- Be a UK homeowner with equity in your property
- Be over 18 years old and reside in the UK
- Pass affordability and credit checks
- Demonstrate a stable income and ability to repay
Some lenders accept applicants with bad credit if other eligibility requirements are met.
Are Secured Loans Regulated?
Yes. Secured loans are regulated by the Financial Conduct Authority (FCA). This means lenders and brokers must:
- Act in your best interest
- Assess affordability responsibly
- Disclose loan terms clearly
- Avoid misleading language
You can raise any disputes with the Financial Ombudsman Service if you’re unhappy with how a lender or broker has treated you.
Pros and Cons of Secured Loans
Pros:
- Borrow larger sums
- Lower interest rates than unsecured loans
- Longer repayment terms reduce monthly cost
- May be available to applicants with poor credit
Cons:
- Your home is at risk if you can’t repay
- Takes longer to process than a personal loan
- May include additional fees (valuation, legal, arrangement)
- Total interest can be higher over a long term
Things to Consider Before Applying
Repayment ability
Be realistic about your monthly affordability. Only borrow what you’re confident you can repay.
Total cost
Look beyond the interest rate — include fees, total repayment, and the length of the loan.
Early repayment charges
Some lenders charge fees for repaying early. Check this before signing any agreement.
Credit consequences
Missing repayments can negatively affect your credit file and may ultimately risk your home.
FAQs
What is the minimum amount I can borrow with a secured loan?
Most lenders require a minimum loan of £10,000, though this can vary.
Will a secured loan affect my mortgage?
Your main mortgage remains unaffected. The secured loan is usually registered as a second charge.
Can I get a secured loan with bad credit?
Yes, some lenders consider applicants with bad credit if they have sufficient equity and affordability.
How long does a secured loan take to complete?
Most secured loans take between 1 to 3 weeks, depending on legal and property checks.
Can I pay off my secured loan early?
In many cases, yes — but always check the terms for early repayment charges.