A secured loan calculator can help you understand secured loan repayments and compare different loans. We’ve explained what a secured loan calculator really does, if you can trust them and much more.

You need to know about this! 

What is a secured loan?

A secured loan is a loan that uses an asset as security within the agreement. What this means is the lender can repossess that asset if you fail to make multiple loan payments as agreed. The asset is then sold and the money raised from the sale is put towards paying off all arrears and the total debt, including late charges if applicable. 

They are the opposite of unsecured loans that do not use any assets as collateral. The amount you can borrow with a secured loan is usually much more than what is possible with an unsecured loan.

Note: Only consider, compare and apply for secured loans from providers that are authorised and regulated by the Financial Conduct Authority. 

How does a secured loan work?

The secured loan is usually provided as a lump sum payment, but sometimes it is taken out over a draw period instead. The borrower will then pay it back through monthly payments that include a rate of interest. This continues for a pre-agreed period until all the loan amount is repaid and the interest. 

If monthly repayments are not kept to, the lender can seize and sell the asset listed as collateral to recover the money – as illustrated above. But if there are no hiccups along the way and all monthly repayments are made, the asset is not touched and the loan is cleared. You can even repay the loan early in most cases, but it could mean having to pay an early repayment charge. 

There might be additional loan fees associated with a secured loan, such as an appraisal of the asset to work out its real value and closing costs. Unsecured loans typically don’t have either of these fees.

Which lenders offer secured credit?

These types of loans are available from the UK’s banks, mortgage lenders, building societies and online loan providers. 

What can be used as security?

Most secured loans use one of the following as collateral within the loan agreement:

  1. A property
  2. Home equity (the value of your home minus your existing mortgage, if you have one)
  3. A vehicle

Some loan providers may allow you to use other assets as security, but these are less common. 

Types of secured loans

Secured loans is really an umbrella term for a wide variety of loans that are secured with an asset. Some are short-term and some are not. There are even secured loans that must be used for a specific purpose.

Here are some examples of secured loans, showing how different they can be:

  1. Car finance loan (to buy a new car only)
  2. General secured personal loan
  3. Home equity loans and HELOCs
  4. Secured home improvements loans (for home improvements only)
  5. Secured debt consolidation loan (for consolidating existing debt only)
  6. First and second charge mortgages
  7. Guarantor loans

How much can I borrow with a secured loan?

An unsecured loan typically has a maximum loan amount of around £25,000. With a secured loan, you can usually borrow more than this, and in some cases, substantially more. 

The total amount you can afford to borrow with a secured loan will heavily depend on the type of loan, and as an extension, the value of the asset being used as collateral. If you use a property or home equity as security and the home may be repossessed for non-repayment, you can borrow significant amounts, sometimes above £100,000. 

How long is a secured loan?

Secured loans are usually repaid over a loan term between 1-20+ years. The amount you need to repay the loan will be determined by the loan amount and your personal finance. And it works the other way around, with the loan term influencing the interest rate you are offered. 

What are my monthly repayments?

Your monthly repayments will be made up of a principal amount, which is a proportion of the loan you borrowed. And the remainder of repayments is made up of an interest rate. 

If you cannot keep up repayments you should engage with the lender early to see if you can renegotiate them to make them affordable. It’s best to speak with your lender early rather than put your head in the sand and miss more of your monthly repayments, creating greater arrears. 

Doing so will also protect your credit history. If the lender has to record payment default on the loan this will negatively affect your credit score. 

Is a secured loan cheaper?

In comparison to an unsecured loan of the same loan amount, a secured loan is generally cheaper for the borrower. With reduced lending risk, the lender is able to offer a loan with a lower interest rate. Yet, this might not always be the case and will depend on personal finances and your credit history. 

And just because the interest is lower doesn’t automatically mean the loan is cheaper. If there are additional fees and charges to pay it could make the secured loan more expensive. You must compare options carefully. 

How much interest do you pay on a secured loan?

The interest payable on secured loans will be based on the loan amount you want to borrow, your finances and your credit history. The best secured loans have interest rates between 2% and 10%, but you can find these loans with much higher rates as well. 

Secured loans may have fixed or variable interest rates. Fixed rates are more common with most of these loans, and means the interest rate does not change throughout the loan. The advantage of this is that you know exactly what your monthly repayment will be and can budget for it more easily.

Variable-rate secured loans mean the interest rate can change over time, either up or down. Some secured loans are more likely to have a variable interest rate, such as second charge mortgages. 

What is an online secured loan calculator?

An online secured loan calculator is a financial calculator added to websites to help you uncover how much you might be able to borrow and what your monthly repayments would be based on the lender’s representative rate. 

You use the calculator by entering the amount you wish to borrow and the period of time you want to repay.  Modern secured loan calculators use sliders so it is easy to check multiple options fast. 

Sometimes the calculator will ask about your asset and its current value, but most of them assume your asset will fulfil the requirements and they’ll only check this once you have applied. 

Secured loan calculator vs loan quote

A secured loan calculator is not the same as receiving a personalised quote for a loan, which are becoming more popular with some lenders. These quotes take into more of your personal situation – such as income and debts – without completing a hard search on your credit file. 

The quote will then crunch numbers to provide a forecast of monthly repayments should you be approved. 

Where can I find a secured loan calculator?

Secured loan calculators can be found on the websites of banks and loan providers offering these loans. These calculators are programmed to include their own APR representative example and can help when comparing loans. 

You might also find secured loan calculators on generic websites that want to help you understand loans and how they work. 

Is a secured loan calculator accurate?

A secured loan calculator is to help the user understand how their loan repayments would work, but it is not possible to make these calculators tailormade to each user and their personal circumstances. 

This is why they are programmed with representative APR repayment terms. Note, that the representative example does usually change based on loan amounts and the loan term, which therefore does provide a small degree of personalisation. 

Yet, the representative rate is what 51% of applications were offered if successful. Therefore, 49% of applicants do not receive the representative rate and are offered a lower or higher rate. Thus, a secured loan calculator is not accurate nearly half of the time. 

This doesn’t mean you should avoid using them to compare monthly repayments with different lenders. If you have an average credit score then it could be a greater reflection of what you could be offered. 

What credit score is needed for a secured loan?

Regarding your credit score, there is no benchmark you need to hit to be approved for a secured loan. Each lender makes its own independent decision regarding your credit score. Some lenders will still approve people with a lower than average score – and you may have to pay a higher interest rate – whereas others could reject you. 

Your credit history is looked at in conjunction with the rest of your application, especially your debt to income ratio which is used to work out the proposed loan’s affordability. 

Who can help me get a secured loan?

If using secured loan calculators isn’t helping you compare, you should consider using comparison websites and even commercial broker services. There may be a broker fee in either case, but it could save you time and possibly money. 

Is it hard to get a second loan?

If you previously had a loan and want another one, it could be easier to get the second loan if you repaid your first loan without issues, as this should have improved your credit score. But the outcome will depend on your updated finances.

If you want to borrow with a second secured loan while you still have an outstanding personal loan, it could be harder to get approved. The reason for this is because more of your income will be needed to pay off the existing loan and you could fail the affordability checks. But again, this is dependent on your circumstances at the time. 

More secured loan calculator help!

For further support navigating online loan calculators or secured loans in general, check out our new guides and articles today. We’ve covered these topics from all angles to make things easy for everyone. 

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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