Secured Loans

What is a secured loan?

This type of loan is usually offered to homeowners as they are prepared to borrow an amount of money against an asset which is normally their property. Many finance companies are keen to offer secured homeowner loans because they have the reassurance that should the loan not be paid back the lender can repossess your home to reclaim the money they have lent you, in much the same way as a mortgage company can recoup payment arrears. The purpose of the secured loan can, for example, be for debt consolidation, home improvements or to purchase a car.

What are the advantages and disadvantages of secured loans?

There are consumer friendly regulations to protect you in the form of the Consumer Credit Act 1974 which stipulates that if you borrow up to £25,000, there is cooling off period of 7 days prior to you signing any credit agreements. For secured loan amounts of £25,000 and above there are no such cooling off periods. Before committing to borrowing always read the credit agreement, clarify the terms with the lender and consider seeking independent professional advice.

The main disadvantage for homeowners who take out secured loans against property is that in the event of non payment, your home may be repossessed. There are insurance policies and payment protection schemes to cover monthly repayments should you not be able fulfil your secured loan commitments. These are designed to cover you against sickness, critical illness, accidental injury, unemployment and death (conditions apply).