What are Secured Loans?

When money is borrowed such that your home or other property you own is held as security for the loan (i.e. the lender has a charge on your property), you have a secured loan. This means that you could lose your home if you default on payments. This is the main risk for you in secured loans.

Getting approval for a loan secured on your property is usually much easier than for unsecured loans because the lender can sell your house to repay the debt should you not make the scheduled repayments. If sold at auction you may not get the 'true market value' and consequently, it could cost you even more.

On the other hand, the main benefit to you - because of this security which the lender has - is the interest rate offered to you: this should be lower because you represent a lower financial risk to the lender. Most people looking for secured loans get quotations from different lenders and compare the APR and possibly other costs which may not be included in the APR, to get the lowest cost loan. Getting quotations online is probably the easiest and fastest way to find the best deals.

With secured loans you can usually borrow substantial amounts (possibly up to £100,000 or so) over a long period and generally, the more you borrow the lower the interest rate you will be charged. As an alternative to secured loans you could consider extending the mortgage on your home.

It may be useful to check on any restrictions on the use of the loan; any arrangement fees; the cost and exclusions of payment protection insurance (if required); penalties or exit charges if you pay off the loan early or switch lenders and whether the interest is charged daily, monthly or yearly.

Finding the best deal for a secured loan means comparing rates and the easiest way to make comparisons is to get quotations online from the many providers on the Internet.