You can now find, compare and apply for secured loans online, including homeowner loans. This guide will provide a quick recap on secured loans before explaining all you need to know about secured loans online. 

Whatever the reason you want to borrow through a secured loan, you should hear this first. 

What is a secured loan?

A secured loan is a type of loan where the borrower must use one of their assets as collateral in the credit agreement. The borrower’s asset remains theirs and can still be used by them throughout the loan repayments. 

If you do not keep up repayments the lender can repossess the asset and sell it to clear the arrears and remaining debt. They may use some of the money to cover late fees. 

You should only consider a secured loan from a lender that is authorised and regulated by the Financial Conduct Authority (FCA). 

How do secured loans work?

There are different types of secured loans and most of them provide the individual(s) with a lump sum payment. This lump sum might have to be used for a specific purpose, such as debt consolidation or home improvements, whereas others can be used for any purpose. 

The borrower must make monthly repayments for a fixed period, ranging from a year to decades depending on the type of secured loan. These monthly repayments are made up of a repayment on some of the capital amount of the loan and the interest rate – and possibly some fees. You might have the option to pay the loan back early, but doing so is likely to incur a fee known as an early repayment charge. 

But as mentioned, failing to keep up repayments means your asset can be seized and sold to recover the debt. For example, if you have secured debts against your home then the home can be repossessed and sold. This is why you should think carefully before securing a loan secured with any asset. 

Are homeowner loans a type of secured loan?

Homeowner loans are a type of secured loan that is secured with the equity in your home. Thus, you can usually get larger sums of credit with a homeowner loan compared to other secured loans. They can be used for a wide range of purposes, but the most common reason to take out a homeowner loan is to complete home improvements or to move all debts into one new debt (i.e. debt consolidation). 

You can work out the equity in your home by taking your remaining mortgage balance away from the value of your home. With positive finances and an excellent credit score, you could be able to borrow against as much as 80% of your home equity. On the other side, your home may be repossessed if you do not keep up with the homeowner loan payments. 

But homeowner loans are not as simple in the event of repossession. Because there are debts secured against your home, there is an order in which lenders can recover the debt owed to them. 

The mortgage lender gets priority in recovering the remaining mortgage balance and any applicable fees. Only then does the homeowner loan provider get to recover the debt secured against home equity. As long as the home has not gone down in value, both debts should be paid off through the property sale and there might even be money left over for the debtor to keep. 

Homeowner loans are also known as second charge mortgages and home equity loans. If you’re considering loans secured against home equity, you may want to search these terms as well. 

Who are secured loans for?

Secured loans can be used by anyone that meets the criteria to apply. You may need to be older than 18 or 21 to apply and you must plan to live in the UK for at least six months of the year, making you a UK tax resident in most cases. 

Most secured loans require the borrower to use a property or home equity as collateral, which means the majority of them are for homeowners. However, you can also get secured loans that use other assets as collateral, such as a car. 

Secured vs unsecured loan

The opposite of a secured loan is an unsecured loan. These loans do not ask the borrower to use an asset as security in the credit agreement. As a consequence of this, loans secured with assets typically allow the borrower to access more credit if needed, and the interest rates can be competitive. 

But just because an unsecured loan doesn’t require collateral, doesn’t mean you can easily avoid paying them. If you clear the total amount repayable, the lender can take legal action against you. They can even ask a judge for permission to use bailiffs, who come to your home and repossess goods to be sold at an auction. And this costs you extra!

The bottom line is that you should strive to pay back the total loan amount as agreed any time you borrow money. If personal circumstances are preventing you from paying, consider getting support from a UK debt charity.

Why you might want a secured loan

A secured personal loan offers two main benefits. They allow you to borrow larger amounts of credit not available through credit cards or unsecured credit. And they offer a competitive interest rate if you have strong finances and a fair or good credit score. 

Borrowing more significant sums of money may be used to complete home renovations, which then increase your home’s value. 

Are secured loans hard to get?

When you apply for a secured loan, the lender must make sure the loan amount is affordable based on your finances. They will collect information about your income and any existing debts, such as repayments on a mortgage. The loan you have asked for and any existing debts must be within a certain proportion of your income, leaving the rest of your income for everyday essential living. 

There is no fixed percentage of your income that your debt repayments must be within. Each lender can apply its own affordability tests, and the outcome of these tests will influence the interest rate offered. On top of this, your credit history will be assessed and your credit score noted. The lender will want to see how you have managed debt repayments in the past.

An accumulation of information is used to either approve or deny the loan application. 

Are secured loans easier to get than unsecured loans?

A secured loan is considered somewhat easier to get approval for compared to an unsecured loan. By using an asset as collateral, you are making it easier and cheaper for the lender to recover any possible arrears. And by extension, you are reducing your perceived lending risk. If you have been denied a personal loan because you did not have a good credit score, you might still get approved for a secured loan. 

Can you get a secured loan without a broker?

You don’t have to use a credit broker if you want to borrow using a secured loan. Many people search and find secured loans online or speak with banks to find the deal that works for them. The growing rate for lenders offering secured loans online has made finding your own loan easier than ever. 

However, you may still want to consider using a credit broker to find a secured loan for you. The best credit brokers can take over the task at hand, saving you time, stress and sometimes even money. There is no guarantee that the broker will find you a cheaper secured loan. If you are looking for significant credit – through a homeowner loan for example – it may be more beneficial to use a credit broker. 

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How can I compare secured loans online?

Lenders make it easy for you to compare different secured loans easily. Most loan providers add a loan calculator to their website, which enables you to enter how much you want to borrow and how long you want to repay. The calculator will then crunch the numbers using a representative example interest rate to show your projected monthly payments including the interest. 

But remember that the representative example rate is just that – an example. It is calculated based on just over half of successful loan applications. Nearly half of applicants will be offered a different loan. To get the representative example rate or better, you will need to have good finances and a good to excellent credit score. 

Can you get a secured loan online?

You now have more options than ever to find and compare secured loans online. The internet has made it easier for anybody to access a wide range of products and services, and secured loans are no different.

Not only is it possible to browse secured loans online, but you can also submit your application online too. This can increase the speed of getting a decision. 

Where is the best place to get a secured loan?

The best secured loans are generally those with the lowest interest rates, although you may need to consider other fees and charges when making comparisons, such as early repayment and closing costs. Here are three places you can take out a secured loan.

  1. Banks

Well-known high street banks offer secured loans in branches and via their website. Banks tend to have some of the best interest rates but may be harder to get approved for. You can find interest offered between 2-10% on average. 

  1. Mortgage lenders

Mortgage lenders are on hand to provide secured loans that fit within their remit, such as second charge mortgages that are secured against home equity. You could argue that a mortgage itself is a type of secured loan. 

  1. Supermarkets and the Post Office

Supermarkets and the Post Office offer credit through secured loans. Their loans are some of the most competitive and can even rival the rates offered by banks. 

  1. Secured loans online

A wide range of online loan providers offers secured loans. There is such a wide variety available that some of these providers offer competitive rates whereas others are much more expensive than banks and supermarkets. 

Can I trust secured loans online?

There are scores of legal and legitimate secured loans online to choose from. However, there are also scam loan companies trying to get your attention. To make sure you avoid any scams, only consider a secured loan from a company that is authorised and regulated by the Financial Conduct Authority. 

This should be stated at the bottom of the loan provider’s website homepage – if not every web page they have. 

Are secured loans online cheaper?

There is no evidence to suggest that secured loans online are any cheaper than taking out a secured loan through a bank – which are also available online!

In fact, lesser-known online lenders tend to have higher interest rates than banks. On the other hand, it could be easier to get approved for a secured loan from an online lender over a high-street bank. It all comes down to your personal circumstances and your credit score. You should do your own research at the time of reading. 

What credit score do I need to get secured loans online?

There is no minimum credit score you need to have to get a secured loan across all lenders. Each lender applies its own affordability tests and credit score assessment, meaning someone could be rejected with one lender and approved at another with the same credit score. 

In fact, your credit history is just one aspect of your application; it will also depend on a range of other factors.

Nevertheless, to get a lower interest rate you should have a good or excellent credit report. 

Can you get an online secured loan with bad credit?

It is possible to be approved for a secured loan with a bad credit rating. Because the loan has been secured with collateral, lenders are usually more open to lending through a secured loan over an unsecured loan to people with bad credit. There are even secured loans online advertised specifically for people in this situation. 

How long does the application process take?

Applying online can save you time having to wait for an appointment with a bank. But the time it takes to get a decision on your application can still take over one month. 

Taking out a secured loan may require an appraisal of your asset, especially if you are borrowing against home equity. It can take time to get the valuation complete, which slows down the application process. 

Unsecured loans are decided on much quicker and can even be approved on the same day as application. 

I can’t afford my online secured loan – help!

Despite affordability checks and the best intentions, our circumstances can change and make loan repayments unaffordable. If you have lost your job or are unable to work due to sickness or injury, it is best to let the lender know. They will try to work out a new arrangement that benefits everyone and prevents them from repossessing your asset. 

Hiding from the problem can only make things worse. Get free debt advice for further support. 

Read more about secured loans online!

Discover more information about secured loans with MoneyNerd. Get all your information and FAQs answered on our site before searching for an online secured loan!

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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