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Secured Debt Consolidation Loans Reviews & In-depth Info

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Scott Nelson

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MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Jan 23rd, 2024
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Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

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Secured Debt Consolidation Loans

If you’re thinking about ways to manage your debt, you may have heard of secured debt consolidation loans. In this article, we aim to help you understand them better. Here’s what we’ll cover:

  • The meaning of a secured loan.
  • True costs of a bad debt consolidation loan.
  • The idea behind debt consolidation.
  • Different ways to consolidate debt.
  • Risks of a secured debt consolidation loan.

Every month, our website is visited by over 170,000 people seeking advice on debt solutions. We understand that dealing with unpaid debt can be stressful, but remember; you’re not alone. There are many ways to tackle debt, and we’re here to guide you through them.

Let’s start learning more about secured debt consolidation loans together.

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Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

What Is a Secured Debt Consolidation Loan?

A secured debt consolidation loan is a loan just like we described above. However, the money you borrow is used to pay off multiple other debts, known as debt consolidation.

Debt consolidation is a strategy used to consolidate the number of debts you owe by taking out a new loan or credit card.

The new loan or new credit card must have a lower rate of interest than the interest on all debts you pay off with it. This will make repayments cheaper and debt consolidation worth it.

Secured debt consolidation loans are rare, except for remortgaging for debt consolidation. You don’t usually hear of people taking out a secured loan with an asset like a computer or watch to consolidate debt. It typically involves remortgaging for debt consolidation. 

How Does Remortgaging for Debt Consolidation Work?

Remortgaging is when you switch your current mortgage deal for a better interest rate.

The deal you received when you bought your property may have been favourable at the time, but mortgages can get better (or sometimes worse) over the years.

Just like you switch your internet provider for a cheaper deal, you can switch your mortgage for a better deal, known as remortgaging.

When you remortgage, you can free up a lump sum of cash, which can be used to pay off existing debts. Thus, you consolidate your debts through a new mortgage with a lower interest rate than your debts. 

Remortgaging for debt consolidation can reduce monthly payments with lower interest, but you might pay back more in total because the mortgage lasts much longer.

» TAKE ACTION NOW: Compare deals from the UK’s leading lenders

Who Are the Best Secured Debt Consolidation Loan Providers?

Here are the two options for secured debt consolidation loans we could find for remortgaging. The representative APR are valid as of September 2023.

Always do your research and see what is new on the market. You might find something better that has just been released. 

#1: Lloyds 

The lowest rate we could find was with Lloyds Bank. They are offering a remortgaging fixed rate as low as 7.05%, rising to 9.5%.

Be aware that they also come with product fees – this is normal – and the fee for this one is set at £1,499.

#2: Santander 

Santander offers a comparable deal with a low initial rate of 5.49%, increasing to 8.5%. However, the product fee is cheaper than Lloyds, at just £999.

These rates are subject to change, and additional fees could be applied. 

Secured debt consolidation loans – an example

One example of a secured debt consolidation loan is available at Barclays Bank.

This is not necessarily the best secured loan available to consolidate debts and is being used as an example only. You should do your own research. 

Barclays offers a secured debt consolidation loan of up to £50,000 with a maximum repayment term of up to 10 years. The amount you want to borrow and the loan repayment term affect the representative interest rate.

For example, loans between £7,500 and £15,000 have the lowest representative APR of 9.9%. The maximum rate they will offer anyone who gets approval is 24.9%. 

You should only consider using a lender authorised and regulated by the Financial Conduct Authority.

Change the amount you are looking to borrow to see what offer you could get

£

Lender

APRC

Monthly payment

Total amount repayable

United Trust Bank Ltd

6.34%

£219.34

£26,320.83

Pepper Money

6.86%

£220.24

£26,429.17

Together

7.99%

£222.20

£26,664.58

Selina

8.45%

£223.00

£26,760.42

Equifinance

9.95%

£225.61

£27,072.92

Evolution

10.2%

£226.04

£27,125.00

Spring

10.5%

£226.56

£27,187.50

Loan Logics

11.2%

£227.78

£27,333.33

How do I search for secured debt consolidation loans?

You can search for these loans online. They are widely available through banks and online loan lenders. You can even find them advertised in some UK supermarkets. 

When you search online, you’ll notice that most lenders advertise secured debt consolidation loans with a loan calculator.

This calculator lets you enter the loan amount needed and how long you want to repay. Using this information, the calculator will show your projected monthly payments and the interest you will have to pay.

However, the rate used is the representative example of the Annual Percentage Rate and is only active for approved applicants just over half of the time.

You may be offered a higher or lower rate based on your personal circumstances and credit score.  

Before You Apply for a Secured Debt Consolidation Loan

Before you apply to remortgage your home for debt consolidation, you need to take the same steps you took when first applying for a mortgage.

This includes checking your credit file for mistakes. If you find them, get them removed.

You might also want to speak with a debt charity and mortgage specialist to see if remortgaging for debt consolidation is your best option.

Other debt solutions exist that could be more advantageous for you. 

Other Secured Debt Consolidation Loans Worth Considering

These current deals all come from mainstream banks. You should check the other big names, but don’t be afraid to look for lesser-known lenders.

Some of the better remortgaging deals are not on the high street. For example, Credit Unions are typically member-owned and may offer more favourable terms than banks.

Can I get a secured debt consolidation loan with bad credit?

A secured loan is generally considered a little easier to get approved for compared to an unsecured loan.

The reason for this is that using an asset as collateral reduces your lending risk. The lender feels it’s easier to get their money back when the loan is secured.

Consequently, it is also pretty straightforward to get a secured debt consolidation loan if you have a low credit score than to get unsecured debt consolidation loans. 

Having a low credit score may still get you approved but you might be offered a higher interest rate than what is advertised through the representative example.

There are some debt consolidation loans advertised exclusively for people with a low credit score

Debt consolidations loans for all purposes

  • Stuck paying high interest on credit card debts & loans?
  • Looking for a better interest rate?
  • Stuck with the confusion of multiple repayment plans?

Polly

“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”

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What is the risk of a secured debt consolidation loan?

The risk of taking out a secured debt consolidation loan is that you may find yourself in a situation unable to keep up your monthly repayments.

If you have multiple payment defaults, the lender has the right to repossess the asset you used as collateral in the loan agreement. 

This asset will then be sold, and the money raised will be used to clear all your debt with the lender, including arrears and fees. Any remaining money from the asset sale will be given back to the debtor.

If you secure the loan with your home and do not keep up with monthly payments, your home may be repossessed. 

All secured loans have this risk. It may make you want to use an unsecured debt consolidation loan instead.

However, secured debt consolidation loans may provide bigger loan amounts at a lower interest rate compared to an unsecured debt consolidation loan – personal finances and credit score depending. 

Source: MSE Forum.

A secured debt consolidation loan could work out cheaper if you’re offered a lower rate of interest overall, when compared to your other debts’ interest rates. It won’t reduce the amount that you owe, but it’ll give you a chance to manage your debt in a simpler way.

More Help Finding a Secured Debt Consolidation Loan

If crunching numbers and searching for the right secured loan is not your forte, you can get personalised help and support.

Secured loan comparison websites can help you compare options swiftly and can be a good starting point.

Or you could receive a more holistic service using a credit broker. You may be charged credit broker fees, but on the other hand, it will make the process easier for you. They could even get you a better deal than if you searched independently. 

Another fantastic tool to help you locate the best secured loans for debt consolidation is at USwitch. Just like you might use this site or their agents to find better utility deals, they have an online tool to find the best remortgaging deals.  

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Looking for a loan? £5,000 to £2.5 million available, compare deals below.

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The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.