> Secured Personal Loan - UK Guide
In a nutshell
A general loan for personal use that is secured against your property (such as your home or your car).
Best Loan for
Any homeowner may find this their best option.
Loan amounts vary widely with a secured personal loan. Your lender will have their own set minimum/maximum borrowing limits and the loan you choose may also dictate your loan amount. You may also be assessed on your incomings and outgoings. Some lenders may restrict the amount you can borrow for personal loans in general - but the fact that you are using your property as collateral gives you more leeway here to borrow higher amounts (up to 125% of your property value in some cases).
You can take out a secured personal loan for anything up to 25 years depending on the lender and the loan you choose. Some lenders won't let you borrow small amounts for their maximum loan period.
A secured personal loan is easy to arrange and can be used for any purpose. The fact that you are willing to use your property as collateral against your loan means that you will benefit from discounted rates. Secured personal loan rates can be much lower in comparison to other loan products.
Secured personal loans can suit any homeowner - and can, in many cases, make it easier for people with bad credit to get a loan. Some loans will also come with a degree of flexibility built into their terms and conditions. This can include overpayment allowances, repayment holidays and penalty-free early repayments. If you take advantage of these types of options, you may find yourself saving a lot of money over the course of your loan.
What to look out for
Secured personal loans can take longer to arrange than many loans because you will need to have your property valued before you will be accepted - so this won't necessarily be a quick solution. And, there is a downside to using your property as collateral to keep your rates low - if something goes wrong and you stop making repayments then your lender can use your collateral to get their money back. So, they could have your property/possessions repossessed. A payment protection scheme will give you some security against job loss, illness or accident here - but it'll add to your total costs. You need to be careful when looking at secured personal loans rates - lenders will always advertise their 'best' rates - and you may not qualify for these once you apply. The low rates you'll see on offer will be offered to a few people with perfect track records that can meet every application rule. If you can't do this then you'll have to pay higher rates. The thing to look at with any secured personal loan is the APR (Annual Percentage Rate). This shows you the actual rate you'll be paying. You need to look hard at special offers as they can often hide much higher APRs - so what looks to be a bargain can often cost you more. And, you don't know how things will pan out in the next few years so you should be looking for flexibility in overpayments, repayments holidays and penalty-free early repayment wherever possible. Not all personal loans will offer this kind of flexibility, however.
If you are taking out a loan for a specific purpose then you could look at a specialist loan. An unsecured personal loan may suit you better if you're worried about using your home as collateral.