A secured loan, which is also marketed as a personal or homeowner loan, is as its name suggests secured against something. In most cases this will be your home, but other assets may be acceptable depending on the size of loan required.
Because of this security for the lender, they are able to offer lower interest rates than would otherwise be the case. This interest is expressed as the Annual Percentage Rate and will be lower than that on offer for the same sum of money borrowed via an unsecured loan.
By using your property as ‘collateral’, it is therefore possible to lever credit easily, even if you have a poor credit history. However, you should be aware that your home may be at risk if you do not keep up with the monthly repayments.
Conversely, if you have a good track of credit repayment, loan providers will often offer secured loans for more than the value of your property, possibly as much as 125 per cent. Subject to your personal circumstances, local property values and remortgage prospects, a loan secured against property can frequently be the best value option.
The beauty of a secured loan is that they are quick and pain-free to arrange even if you have an existing mortgage in place. There are also far fewer set up expenses involved with a secured loan compared to releasing capital by selling a house and moving home.
