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Secured Loans In Scotland – Complete Review

secured loans Scotland

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

“Secured loans Scotland” is a popular internet search by residents north of Hadrian’s Wall wishing to take out secured credit for home improvements, debt consolidation, sun-drenched vacations and much more. 

Here you can find lots of information and top tips when looking for secured loans in Scotland. 

What is a secured loan?

A secured loan is a type of loan that makes it easier for the lender to recover all arrears and the remaining debt if the borrower fails to keep up monthly repayments. 

It is easier because the borrower must use an asset as security in the loan agreement, meaning the lender can repossess this asset and sell it to clear the debt. Most of the time the asset must be a property, home equity or a vehicle. 

To avoid scam lenders, only look for these loans through businesses that are authorised and regulated by the Financial Conduct Authority. 

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How do secured personal loans work?

Nearly all secured loans provide the borrower with a sum of money in a lump sum payment. They must then pay back this loan over a set period made up of monthly repayments. Each monthly payment repays some of the principal loan amount and the interest rate on this amount. The borrower may be able to pay back the money earlier, however, this may mean having to pay an early payment fee.

If multiple repayments are missed, the lender can decide to repossess your asset used as collateral in the credit agreement. The asset would then be sold and the money received is used to pay off all arrears, fees and the remaining loan balance. Any remaining money is given back to the debtor. 

Can you get secured loans in Scotland?

You can get secured loans in Scotland. Many Scottish banks and UK-wide online loan providers offer secured personal loans to Scottish residents. Your application will be subject to personal finances and a credit rating assessment. 

Are secured loans hard to get in Scotland?

Secured loans are no harder or easier to get in Scotland than in other areas of the UK. In fact, most people taking out a secured loan in England and Wales will be using the same lenders as residents of Scotland. Overall there may be fewer options around, and this could technically make it a bit more difficult.

Your application will be subject to an affordability check, which analyses how much of your regular income will be required to meet your loan payments and any other debts you might have ongoing. This is standard practice when applying for any secured or unsecured personal loans. 

What are two examples of secured loans (Scotland)?

The most common type of secured loan in Scotland – and most other places in the world – is a mortgage. First charge mortgages are used to buy a property with that property used as collateral in the mortgage agreement. If mortgage repayments are missed with no resolution, the mortgage provider can take back the property and sell it. 

Another example of a secured loan in Scotland is a secured debt consolidation loan. Debt consolidation is when you take out a new loan or credit card and use the funds to pay off multiple other debts, merging all your borrowing into one place. It’s beneficial when the new debt consolidation loan or credit card has a lower interest rate compared to the interest rates being paid on the other debts. 

The advantages of a secured loan

Some benefits of choosing a secured loan over unsecured credit are:

  1. Access a bigger loan amount – secured credit usually offers the chance to take out a bigger loan. This makes sense because the asset being used as collateral can be significantly valuable, especially if it is home equity or a property. 
  2. Lower interest rates – although not exclusively, secured credit can typically offer lower rates compared to unsecured loans. 

The disadvantages of a secured loan

Yet, there are also some drawbacks of using these loans, namely:

  1. Assets at risk – there is a genuine risk that you could have your asset seized if you can no longer make payments.
  2. Additional fees – secured credit can include additional loan fees and charges, such as closing costs. 

Where can I find secured loans in Scotland?

You are likely to find a secured loan advertised at Scottish banks, building societies and online loan providers operating throughout the UK. 

They are advertised with a representative interest rate which is an estimate based on 51% of successful loan applicants (unless otherwise stated). Be aware that the rate you are offered might not be the same. It could be higher or lower depending on your circumstances and credit file. 

You can compare options yourself online or by speaking with local banks. Alternatively, you may want to use secured loan comparison websites or credit brokers. Using either of these could make it easier and quicker to find the loan you need, and they may even save you money. But they may also come at a cost, such as commission. 

Remember to only consider options advertised by lenders that are authorised and regulated by the Financial Conduct Authority. 

Secured loans Scotland – an example

One example of secured loans offered in Scotland is with the Bank of Scotland. They offer a range of short-term and long-term borrowing, including secured loans and mortgages. You should conduct your own research to find the best deals. This is provided as an example only. 

Can I get a secured loan in Scotland with a poor credit score?

If you have a poor credit score, you might still get approval for a secured loan in Scotland. You can even find these loans advertised by some online lenders specifically targeting people with bad credit. 

However, those with an unsatisfactory credit rating are likely to be offered a higher interest rate compared to applicants with a good or excellent rating. For this reason, it’s worthwhile trying to improve your score before making an application, possibly by identifying errors and having them removed. 

Are secured loans easier to get than unsecured loans?

Secured loans in Scotland and anywhere else are considered easier to get approval for than unsecured loans. 

The biggest reason for this is because securing a loan with an asset reduces perceived lending risk. Thus, even if your credit score isn’t perfect, the lender knows they can get back the loan easier than if they were borrowing through an unsecured loan. 

You’ll still need to prove you can afford the loan comfortably to get approved. 

More guides discussing secured loans in Scotland

We have a great deal more guides discussing secured credit in the UK. Check out MoneyNerd’s other free guides for more clear answers and guidance on this topic.