Secured Loans Guide
Secured loans provide individuals with an opportunity to borrow money by leveraging their assets as collateral. This type of loan offers unique advantages and considerations that are important to understand before making a financial decision
In this article, we will delve into the world of secured loans, exploring their definition, how they work, as well as the pros and cons associated with them. Moreover, we will highlight key factors that borrowers should be aware of before applying for a secured loan, and provide useful insights on how to navigate the application process effectively.
Whether you are considering a secured loan or simply want to expand your knowledge on the topic, this article will serve as a comprehensive guide to help you make informed decisions regarding secured loans.
Table of Contents
- What Is a Secured Loan?
- How do Secured Loans work?
- Best Secured Loans
- Advantages and Disadvantages of Secured Loans
- Benefits of a Secured Loan:
- Drawbacks of a Personal Loan:
- How much does a Secured Loan Cost?
- How to Apply for a Secured Loan
- Alternatives to Secured Loans
- What happens if I miss a personal loan repayment?
- Do I need a good credit score to get a personal loan?
- Can you be pre-approved for a personal loan?
- How long will it take to get my money?
- What can I do if I need to borrow more than they’ll lend?
- What happens if I can’t repay my loan?
- Can I repay my loan early?
- What will happen if UK interest rates change?
What are Secured Loans?
Secured loans are like the Chuck Norris of the lending world. They are loans that are backed by collateral, such as your home or car. This collateral acts as a safety net for the lender, giving them the reassurance that they can seize the asset if you fail to repay the loan. Don’t worry, though, you won’t be roundhouse kicked out of your home or have your car magically disappear overnight – we promise!
Secured loans provide individuals with an opportunity to borrow money by leveraging their assets as collateral. This type of loan offers unique advantages and considerations that are important to understand before making a financial decision
How do Secured Loans Works?
Secured loans work by using your collateral as a bargaining chip to get better loan terms. Since the lender has more security with a secured loan (thanks to that awesome collateral you provide), they are more likely to give you lower interest rates, higher borrowing limits, and longer repayment terms. It’s like having your own personal bodyguard watching over your loan, making it feel safer and less risky for both parties involved.
Benefits of Secured Loan
Secured loans come with some pretty sweet benefits. For starters, they often have lower interest rates than unsecured loans. This means you’ll end up paying less in interest over the life of your loan, leaving you with more money in your pocket. Secured loans also tend to have higher borrowing limits, so you can get your hands on more cash if you need it. Plus, with that extra security backing up your loan, lenders often have a more relaxed approval process. It’s like having a VIP pass to the lending club.
Best Secured Loans
If you’ve done the work and figured out that a personal loan makes sense for you, there’s no shortage of options to choose from. There are thousands of personal loan lenders out there, we break down a few of the best personal loans to choose from.
See Which Loans You Qualify For
Best Secured Loans for Low Rates
Loan.co.uk
- Loan Amounts £1000 – £30,000
- Loan Terms from 3 to 18 months
- No Minimum Credit Score
About Loan.co.uk
An award winning, UK based loans and mortgages fintech, we have helped 1,000’s of people to consolidate their debt and fund home improvements, weddings and other life changing purchases. We have also helped 1000’s people to consolidate their over expensive debt. We are rated 4.97 out of 5 on Reviews.co.uk from more than 1650 reviewers. We provide completely free, no obligation quotes after searching our extensive panel of lenders with 1000’s of secured loans products from across the market using the most advanced technology in the country. Loan.co.uk is a credit broker not a lender. Loan.co.uk is authorised and regulated by the Financial Conduct Authority, FCA reg number 718486.
At Loan.co.uk, a senior leadership team with over a 100 years’ experience in digital loan acquisition and fulfilment, merges cutting edge proprietary technology, with a simple consumer brand and a team of the most helpful, experienced and professional employees in the country, on a mission to simplify the way UK consumers borrow money forever. We believe our fusion of hard working, talented people and forward-thinking technology can help you.
What makes us different.
- We pay for everything – Credit searches, valuations, legal searches, third party references. We cover the cost of everything.
- Our client fees are up to 60% cheaper than our homeowner loan competitors.
- Market leading technology. We continue to invest millions of pounds in our technology to make the client experience simple, transparent and hassle-free.
- We will work with you to understand how we can be successful together, helping our mutual clients obtain the money they need, while generating income for your business.
Best Secured Loans for Bad Credit
PostOffice.co.uk
- Loan Amounts £1,000 – £50,000
- Loan Terms 12 – 84 months
- APR Range 8.49% – 35.97%
- No Minimum Credit Score
About Post Office Secured Loans
At Post Office®, we aspire to be at the very heart of customers’ choice by becoming the most trusted provider of essential services to every person in the land.
We’re the UK’s largest retail network and the largest financial services chain in the UK with more branches than all of the UK’s banks and building societies put together. We also have growing direct channels such as contact centres and online – meaning we’re there for more customers, in more ways.
Post Office® and its partners offer over 170 products under four product pillars:
• Financial Services
• Mails & Retail (not currently available on the affiliate program)
• Government Services (not currently available on the affiliate program)
The Post Office® is now more than it ever was – an independent multi-channel business, with a vibrant, fast-growing financial services business, separated from Royal Mail and embarking on a new era of growth, modernisation and customer excellence in serving the UK population.
We have the largest retail network in the UK with almost 11,800 branches. And we want to grow further: we are a multi-channel business providing more than 170 products and services to our customers but our vision is to deliver more. Our financial services business, for instance, is one of the fastest growing in the UK, with almost 3 million customers, a growing mortgage business and a current account being piloted in 2013. The Post Office®, trusted and part of the fabric of our society, is an increasingly credible alternative to the high street banks.
Choose a loan between £1,000 and £25,000 with fixed monthly repayments.Post Office Money® Personal Loans are provided by Bank of Ireland (UK)
Best Secured Loans for Small Loans
AA Loans
- Loan Amounts £1,000 – £40,000
- Loan Terms 12 – 60 months
- APR Range 8.05% – 36.00%
- No Minimum Credit Score
About The AA Loans
AA Loans offer unsecured personal loans, they can be used for debt consolidation, car, home improvements etc. The rate is currently 3.3% (from 23rd June 2020) and is provided by Bank of Ireland UK.
USPs
- Fixed monthly repayments for the duration of the loan
- Spread the repayments over 1-7 years
- No arrangement or set up fee
- Other Loan amounts and terms available. Loan amounts range from £1,000 to £25,000, with terms available from 1-7 years.
To apply for an AA Loan applicants must:
- Have been a UK resident for at least 3 years
- Be over 21 and no older than 70 when the loan term ends
- Have a regular (minimum) annual income of £12,000 (gross). If you are self- employed you must have been employed for a minimum of 2 years
- Have a UK based bank or building society current account that can pay direct debits
- Ensure that they can meet the repayments, as missed payments incur a charge and could have severe consequences on their ability to obtain future credit
Best Secured Loans for Fast Funding
MasterLoan.co.uk
- Loan Amounts £2,000 – £36,500
- Loan Terms 12 – 72 months
- APR Range 7.99% – 35.99%
- No Minimum Credit Score
About MasterLoan.co.uk
Masterloan.co.uk compare 100’s of different loan plans, no matter where you are in the UK. Our dedicated home loans team will search and find the best solution for you and at all times we will keep you informed of you home loan application. We offer homeowners and business owners loans and mortgages and offer loans from £1,000 up to £2.5 Million with fast market leading completions.
Best Secured Loans for No Fees
ComparetheMarket.com
- Loan Amounts £5,000 – £100,000
- Loan Terms 12 – 84 months
- APR Range 8.99% – 23.43%
- No Minimum Credit Score
About ComparetheMarket.com
ComparetheMarket.com is a leading online platform that offers a wide range of financial products and services. With a mission to empower individuals with the knowledge and tools to make informed financial decisions, comparethemarket.com has become a go-to destination for those seeking various insurance products, financial services, and more.
Why customers choose Quick Car Finance??
- Best Car Finance Deals £4,000 – £25,000+
- Used By 500,000+ People Last Year
- High Acceptance Rate & Poor Credit Considered
- Email creatives available upon request
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- Over 250,000 vehicles to choose from
Advantages and Disadvantages of Secured Loans
Benefits of a Secured Loan:
- If you’re thinking of taking out a secured loan, here are some pros and cons to weigh up first.Lower Interest RatesOne of the major perks of secured loans is the lower interest rates they offer. Since the lender has that collateral to fall back on, they’re willing to give you a better deal. This means you’ll pay less in interest and have more money to spend on things you actually enjoy (like pizza or a Netflix binge).
Higher Borrowing Limits
Need a sizable chunk of cash? Secured loans have got your back! The collateral you provide gives lenders the confidence to lend you more money. So whether you’re planning a dream home renovation or starting your own llama farm, a secured loan can help you achieve those big dreams.
Easier Approval Process
Getting approved for a loan can sometimes feel like solving a complicated math problem. But fear not! With secured loans, the approval process is often smoother and less stressful. The lender has that collateral as a safety net, so they’re more lenient when it comes to credit scores and your financial history. It’s like having a cool teacher who’s willing to give you extra credit!Cons of Secured Loans
Risk of Collateral Loss
Remember that whole collateral thing we talked about earlier? Well, here’s the downside: if you can’t repay your loan, the lender has the right to take possession of the collateral. So, if you’re not careful, you could end up saying goodbye to your cherished assets. It’s like letting a mischievous leprechaun borrow your most prized possession. You better hope they return it unharmed!
Longer Repayment Terms
Secured loans often come with longer repayment terms. While this can be a good thing if you want lower monthly payments, it also means you’ll be in debt for a longer period of time. It’s like the never-ending story but with interest.
Potential Impact on Credit Score
Missing loan payments can have a negative impact on your credit score, and secured loans are no exception. If you’re not careful with your repayment, it could tarnish your credit history. So, make sure to stay on top of those payments and avoid any credit score headaches. No one wants to be haunted by the ghost of bad credit
Types of Assets Accepted as Collateral
When it comes to collateral, not all assets are created equal. Lenders typically accept assets like your home, car, or even your fancy vintage wine collection. Just make sure you’re not offering up something like your collection of novelty retro toaster ovens. They’re cool, but probably won’t cut it as collateral.
Loan-to-Value Ratio
The loan-to-value ratio is like the secret handshake of secured loans. It’s the percentage of your collateral’s value that the lender is willing to loan you. So, if your asset is worth $100,000 and the loan-to-value ratio is 80%, you can borrow up to $80,000. Just remember, this ratio can vary from lender to lender, so it’s worth shopping around for the best deal.
Importance of Repayment Plans
Repaying your loan on time is crucial. Not only will it keep your credit score in check, but it will also prevent you from losing your collateral. So, before taking out a secured loan, make sure you have a solid repayment plan in place. It’s like having a GPS guiding you to loan repayment success. Now that you’re armed with the knowledge of secured loans, you can confidently explore your borrowing options. Just remember, with great borrowing power comes great responsibility. Use your loan wisely, and you’ll be on your way to achieving your financial goal.
Requirements to apply for Secured Loans?
When you use our eligibility checker, we’ll show you a list of personal loans you might qualify for.
Once you’ve chosen a personal loan, you’ll be taken to the lender’s site to apply. You’ll need to have details including:
- All the addresses you’ve lived at for the past three years
- Your email address
- Your employer’s details, including their address and phone number
- Details of your monthly income and outgoings
- Your bank or building society account details.
This helps the lender assess whether you’ll be able to make the loan repayments.
What are the Alternatives to Secured Loans?
There are five main alternatives to Secured loans:
There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.
Personal loans
If you’re having trouble getting accepted for a personal loan or you’re looking to borrow more than £25,000, you could try applying for a personal loan. This type of loan is also known as a homeowner loan.
You’ll need to offer an asset such as your home or car as collateral. This could be recovered by the lender if you fail to make the repayments.
Credit cards
If you’re looking to borrow a small amount, a 0% interest credit card could be a useful alternative to a personal loan.
Make sure you can afford to keep up with the minimum monthly repayments and ideally repay the full amount before your 0% period ends.
Overdraft facility
If you only need to borrow a small amount of money for a very short time, consider using an interest-free overdraft, if you have one. If you don’t, it could be worth looking at alternative current accounts that offer this facility.
Peer-to-peer personal loan
Peer-to-peer (P2P) loans work in a similar way to standard personal loans. The difference is you borrow money from another person or group of people, instead of a bank or building society.
You can find P2P lenders on dedicated websites. Interest rates vary and can be affected by your credit score. However, P2P lending can sometimes offer lower interest rates compared to traditional lenders.
Car Finance
Car finance helps people buy a car that they couldn’t normally pay for up front. You’ll typically pay a deposit, followed by monthly repayments (with interest) over a fixed term. This could be from two years up to five years.
There are several different types of car finance available:
Compare Secured Loans
Click a comparison website below to recieve secured loans quote
Frequently Asked Questions about Personal Loans
There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.
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How Much do Personal Loans cost?
The cost of a personal loan depends on how much you want to borrow, the APR and how long you take to pay back the money. Interest rates vary according to the size and length of the loan. A longer loan term may attract lower rates, but the overall cost will be higher than a short-term loan. And borrowers with poor credit scores will be charged higher interest rates. We can arrange finance for most cars and vans and cover the majority of UK dealers.
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What happens if I miss a personal loan repayment?
If you miss a loan repayment, the lender may add extra charges and interest to your loan. Missed payments will also be noted on your credit report, which could harm your credit score and make it harder for you to borrow in the future. If you think you’re going to miss a payment, contact your lender. The sooner you discuss your options, the more flexible the lender may be.
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Do I need a good credit score to get a personal loan?
You may be able to get a personal loan with bad credit, but it will affect how much you can borrow and the amount of interest you’ll be charged. The better your credit score, the better terms you’ll be offered for a personal loan because the lender will be more confident you’ll be able to repay it. However, buying a car on finance can be more expensive than buying outright. Unless you get a 0% finance deal, you’ll likely be paying interest over several years and there’s a cost to that. Make sure you’re fully aware of the costs involved and only commit if you’re confident you can pay the car off.
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Can you be pre-approved for a personal loan?
Yes, you can be pre-approved for a personal loan. Pre-approval means your loan application will be accepted based on the information you’ve provided. The interest rate, loan amount and term length will all be guaranteed, pending final checks from the lender. Put simply, it’s a ‘what you see is what you get’ deal. Credit is subject to status and additional affordability checks.
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How long will it take to get my money?
With some lenders, you can get your money on the same day as your application if you already hold an account with them. But you can normally expect to get your money within a week. The quote will be valid for 30 days, so it gives you time to look for your dream car if you haven't already found it. Once you have decided, you'll need to provide the details of the car and of your approved dealer. The money will be transferred to the dealer and you'll receive the deeds to the car when you collect it.
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What can I do if I need to borrow more than they’ll lend?
If you need to borrow more than the lender is willing to offer you, or you need more than the typical £25,000 limit, consider a secured loan. You can borrow £100,000 or even more with a secured loan, but you’ll need to offer something of value as collateral, like your home. Think carefully before taking out this type of loan. If you miss repayments, the lender can seize the asset you put up as collateral to repay what you owe.
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What happens if I can’t repay my loan?
If you’re struggling to repay your loan, contact your lender as soon as possible. They may be able to support you with managing your repayments. Alternatively, contact a debt advice service. They’ll be able to help you organise a debt repayment plan with your lender. If you can’t reach a compromise with your lender, you’ll probably be charged penalty fees for partial, late or missed repayments.
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Can I repay my loan early?
You can pay off your personal loan early, but you might have to pay an early repayment charge (ERC). Early repayment charges vary, but you can usually expect to pay the equivalent of one to two months’ interest.
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What will happen if UK interest rates change?
If your personal loan has a fixed interest rate, it won’t be affected if UK interest rates change. Your monthly repayments should remain the same, regardless of what happens to the Bank of England base rate.
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How long will it take to get the money?
Every lender differs. Some can get you the funds same day. However, it's usual for the money to come through in about three to five days. You can then arrange with the dealer to pick up your new car.
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How do I calculate my deposit?
Your deposit is the amount of money you have available to pay the dealership upfront. This could include savings and/or the value of a current vehicle as a part-exchange, and it’s taken off the total sum of the car you’re buying.
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Can I sell my old car, as a deposit?
Yes, you can sell your car online and use the money as a deposit for your new car. You can sell your car online with the AA, thanks to our partnership with Motorway. Get the best price for your car from 5,000+ dealers. It’s completely free with home collection.
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Can I pay off the loan early?
Yes, you can pay off your loan at any time without incurring any early repayment charges. You will receive a rebate of interest if you pay off the loan early. You can also make overpayments with most of our lenders to help shorten the length of your loan.
Other Types of Loans Available
There are several different types of car finance available, with different eligibility criteria, that are designed to suit different needs and circumstances.
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