Frequently asked questions
What does a 'secured' loan mean?
A secured loan is a loan attached to your home or a property you own. If you cannot pay the debt, the lender can apply to the courts and force you to sell your home to get their money back.
Find out more about home repossession.
How does a secured loan work?
The lender will make you an offer on the basis that they have the right to repossess and sell your home if you fail to make payments.
Because they have security of your home, they may:
- Offer lower interest rates than for other types of lending
- Lend to people with a bad credit history who would not get an unsecured personal loan
They should still check that you can afford the payments.
You may find that you can borrow more through a secured loan than you can through a personal loan.
Can you pay off a secured loan early?
It depends on the agreement. Make sure you understand the terms of the loan before you sign up.
There are often penalties for paying off secured loans early. These are known as "early repayment charges".
Are you looking for information about loans to consolidate debt? Find out about secured and unsecured debt consolidation.
Secured loans and debt consolidation
Many secured loans are offered as a way to consolidate your debts. The interest rates are lower than unsecured personal loans because the risk to the lender is reduced when the loan is attached to your property.
The lower interest rates for a secured loan can make them seem like a good option for debt consolidation. But if your situation changes and you cannot afford to pay the loan, the lender could take action to repossess your home.
If you are thinking about consolidating your debts, it could be a sign that you are finding it hard to pay your existing debts.
In this case we would recommend getting expert debt advice on your available options before securing a debt to your home.