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Michelle Monck

Consumer Finance Expert
Published: 11/12/2020
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Homeowners wanting to borrow money in 2021 to fund home improvements, to add a home office or to buy a property before the stamp duty holiday ends in March could consider financing this using a remortgage or a secured loan. And, as many households look over the family budgets in January, they may also be considering if they should consolidate debts in order to reduce their monthly outgoings.

Those needing to act quickly will find a secured loan is significantly faster to complete than a remortgage. According to data from Loans Warehouse the average time from application to completion for a secured loan in October 2020 was 13 days.

However secured loans do have pros and cons and they may not be the right answer for every borrower.

How does a secured loan work?

A secured loan is when you use your home as security to borrow money from a lender. In general, secured loans in the UK are usually what is called a second charge mortgage. This is when a borrower already has a mortgage on their property but decides they want to borrow from another, ‘second’ lender. This may be because the borrower needs the funds quickly, for example buying a property at auction or to consolidate debts and reduce monthly outgoings. However, the risk is that if the borrower cannot make the monthly repayments then their home could be at risk.

Are rates competitive for a secured loan?

The top rate for a £25,000 unsecured loan over five years is currently 2.80% APR compared to a headline rate of 3.80% for a secured loan. Those wanting to borrow for the purpose of consolidation may find it harder to be accepted for an unsecured loan especially if they don’t have a good or excellent credit score.
This is because the only security the lender has for an unsecured loan is the borrower’s previous behaviour in paying back debt. Whereas with a secured loan the lender always has the property to repay the debt if needed. Secured loans may also include a lender and/or a broker fee.  
Borrowers can find out more in our guide how to check your credit score or compare secured loan rates using our chart tables. 


Is it easy to get a secured loan?

Getting a secured loan is a similar process to applying for a mortgage. The broker or lender will need to see income and outgoings for affordability tests and a valuation is required. Increasingly valuations are happening virtually helping to keep processing quick.

Are lenders active in the secured loans market?

Data from the Financial and Leasing Association has shown the amount of secured lending has grown again in October 2020 to £68m up from £56m the prior month. This move towards returning to lending levels seen before the Covid-19 pandemic is reiterated by Loans broker, Loans Warehouse in its latest Secured Loan Index. The broker is also predicting that 2021 will see lending volumes return to pre-pandemic levels and rumours of lenders intending to introduce new product ranges and rate reductions in 2021.
A secured loans broker will explain any fees and will help borrowers to find the right lender for their circumstances balancing the speed of response required with finding the best rate for the borrower. 



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