What should I consider before applying for a secured loan?
There are many things to consider before you buy a secured loan, including:
- How much you can afford to borrow
- How much your asset is worth
- The potential consequences of the loan
- Loan fees
- Your credit score and history
- Your financial situation
How much you can afford to borrow is determined by your current financial situation. Consider the amount you want to borrow, as well as how much you can realistically afford to pay back.
Secured loans usually allow you to borrow more. But that means you’ll likely pay back more interest. Our loan calculator can help you work out roughly what you can afford.
How much your asset is worth is essential to know. If you’re going to use your house as collateral, it could help to find out its value before applying for a loan.
This will give you an idea of what to expect when the lender arranges an independent asset review after you’ve applied for a secured loan.
The potential consequences of your loan can be significant. If you use your house as collateral and you default on your secured loan, you could lose your home. Make sure you can afford the loan repayments before applying.
Loan fees are something else to consider. You’ll have to pay broker fees and arrangement fees. Plus, if you pay your loan off early, you may have to pay early payment fees too.
Finally, your APR will affect how much your monthly repayments are. Our guide on how to understand APR may help.
Your credit score and credit history will determine your interest rate. Generally, the higher your credit score, the better the deal you might get. So it’s worth looking at ways to boost your score as much as possible.
Your future financial situation may change in the future, which could affect your repayments. Any major future expenses, like starting a family, should be taken into account when working out if you can afford the loan repayments.
Need more help?
What are the risks of a secured loan?
If you miss your monthly repayments, you could risk losing your home or what you’ve used as collateral. Make sure you understand the risks before applying. Lenders may move quickly to recoup the losses of missed payments.
How much can I borrow with a secured loan?
A secured loan will typically offer between £1,000 to £250,000. But it depends on the lender and your own personal and financial situation.
What is a secured loan used for?
You can use a secured loan for a variety of purchases, including home renovation projects such as a new kitchen or an extension, buying a new car or even consolidating your debts.
What alternatives are there to a secured loan?
If you find a secured loan isn’t right for you, there are other options available to you:
A personal or unsecured loan might be more suitable if securing an asset like your home isn’t an option for you.
A guarantor loan is also a potential option if your situation fits the criteria. This type of unsecured loan requires a family member or friend to guarantee to pay back the loan if you’re unable to. A good option if you have a poor credit history.
Remortgaging is an alternative if you’re happy to use your home to acquire the money you need. You may also be able to find a better mortgage deal than your current one!
Can I get a secured loan with bad credit?
If you have a poor credit history, getting approved for a loan can be difficult, but there are options available to you. Some lenders can offer loans to people with bad credit, but at a higher interest rate. Find out more about bad credit loans.
Will getting a secured loan help my credit score?
If you make all your monthly repayments on time and in full, you may see your credit score improve in just a few months. This is because it shows you’re able to borrow a large sum of money and responsibly pay it back to the lender.
Will someone value my home when I take out a secured loan?
Once you’ve applied for a loan, your chosen lender will arrange for a chartered surveyor to value your home. As soon as the valuation is complete, the lender will then be able to offer more solid terms on your loan, including how much they’re prepared to lend you.
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