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Representative example: If you borrow £35,000 over 14 years at a rate of 8.95% variable, you will pay 168 instalments of £418.88 per month and a total amount payable of £70,371.84. This includes the net loan, interest of £30,326.84, a broker fee of £3,550 and a lender fee of £995. The overall cost for comparison is 11.8% APRC variable.

Typical 11.8% APRC variable. Maximum APRC 24.9%

Minimum loan term of 1 year. Maximum loan term of 30 years.

Secured loans explained

It can be difficult deciding what the best way to borrow money is if you need to buy a new car, pay for home improvements, get married, pay for medical treatment, or go on that dream round-the-world trip. Here we explain how secured loans work and when they could be a good idea.

What is a secured loan?

If you are already a homeowner with a mortgage, you may be able to borrow more money using your property as security. A secured loan is a type of mortgage, which you can take out if you already have a mortgage secured against the property. Secured loans are also called second charge loans because the secured loan lender is second in line to get their money back if you are unable to repay the debt. The mortgage company has the first charge on the property and recovers its money first.

As a result of the additional risk to secured loan lenders, interest rates on secured loans tend to be more expensive than first charge mortgages. Secured loans also tend to have variable interest rates that could go up or down over time and not just when the Bank of England base rate changes. However, although mortgages with variable interest rates do generally move in line with the base rate, this is not guaranteed.

How to compare secured loans?

When shopping around for a secured loan, there are a number of things to consider before coming to a decision:

  • Your home is at risk with any loan secured against it, like a mortgage or secured loan. Missing payments or defaulting on the loan will harm your credit score and could mean you lose your home.
  • Shop around for a secured loan and compare the total cost of different secured loans taking account of fees and charges to set up the loan, which can be expensive.
  • Bear in mind that the amount you pay each month with a secured loan with a variable interest rate could increase or decrease if the lender decides to change the rate.
  • Look at other ways of raising the money you need, like, remortgaging, and unsecured loans, etc.
  • If you are struggling financially, you should get some free debt advice before borrowing more money. There may be better ways to sort out your finances. You should speak to Citizens Advice, National Debtline or Stepchange who can help you sort out your finances.

Is remortgaging an alternative to a secured loan?

Remortgaging is another way of increasing the size of your mortgage to release funds. Remortgaging your home releases equity in your property by increasing your mortgage with your current lender or a new mortgage lender. You may have equity in your property because you have paid off some of your mortgage, if the property has increased in value, or if you paid a large deposit when you took out the mortgage. See our Guide to Remortgaging for more information about how remortgaging works.

What are bridging loans?

If you need to borrow a large amount of money for a short period, a bridging loan could be an option. For example, you may want to borrow money to buy a new property while you wait for the sale of your house to be completed, or you want to buy a property at auction, or if you are waiting for money to come through from an inheritance or court case etc.

Bridging loans are either open-ended or have a fixed end date. Bridging loans with a specified end date could be used if you have exchanged contracts on a house purchase, but are waiting for the sale to complete, for example. Like mortgages, bridging loans use your property as security for the loan.

If you don’t have a mortgage on the property you want to use as security, you could get a first charge bridging loan. If you already have a mortgage on the property, you would have to obtain a second charge bridging loan. With a second charge bridging loan, the bridging loan lender gets their money back second (after the first charge lender) if you couldn't repay the debt, so second charge bridging loans tend to be more expensive.

You might be able to borrow between £25,000 and more than £20m or £25m with a bridging loan depending on the value of your property and any debt already secured against it. With a bridging loan, you can borrow up to around 75% of the value of your property. You can usually borrow more with a first charge bridging loan than a second charge bridging loan because there is less risk for the lender of getting their money back.