🔐 What is a secured loan?

A secured loan is a type of borrowing where you use your property (usually your home) as “security” or “collateral” for the loan. That means if you can’t repay it, the lender has the right to take action to recover the debt, which could include repossessing your home.

This makes it different from a personal loan (also called an unsecured loan), where there’s no property tied to the loan.

🧮 How much can I borrow?

With a secured loan, people often borrow between £10,000 and £500,000, depending on:

• The value of their property
• How much equity they have in it (more on this below)
• Their credit score
• Their income and affordability

🏡 What is equity?

Equity is the value of your home that you own outright.

Example:

• Your home is worth £300,000
• Your mortgage balance is £200,000
• Your equity is £100,000

Most lenders will allow you to borrow up to a certain loan-to-value (LTV), for example 75%–85% of the property’s total value, minus your existing mortgage.

📝 Why do people take secured loans?

• To pay for home improvements (like an extension or new kitchen)
• To consolidate existing debts into one manageable payment
• To fund big life costs like weddings, cars, or school fees
• To borrow more than they could with an unsecured loan

💬 What are the pros?

• Larger loan amounts available
• Lower interest rates than unsecured loans (especially if you have good equity)
• Longer repayment terms (e.g. 5–25 years)
• May be accessible even with bad credit

⚠️ What are the cons?

• Your home is at risk if you can’t keep up repayments
• Fees can be high (more on that below)
• Over a long term, you may pay more interest overall

📋 Things to Check (Explained)

Let’s walk through key terms and what they really mean:

1. APR (Annual Percentage Rate)

This is the total cost of borrowing, including interest and fees, shown as a percentage.

• Why it matters: A lower APR means cheaper borrowing overall.
• Watch out: Some lenders advertise a low “representative APR,” but you may not qualify if your credit score is lower.

2. Arrangement Fee

This is a fee charged by the lender or broker for setting up the loan.

• Can range from £295 to £2,000 or more
• Often added to your loan, which means you pay interest on it

3. Valuation Fee

The lender may charge to check the value of your property.

• Some lenders offer free valuations; others charge £100–£400

4. Legal Fees

Because this is a mortgage-type product, legal work is usually needed.

• Fees cover title checks and charges
• Some lenders offer cashback or include legal fees in the deal

5. Early Repayment Charges (ERCs)

This is a fee if you pay the loan off early.

• Usually a % of the remaining balance (e.g. 1–5%)
• Check your loan terms for how long the ERC applies