Types of Secured Loans | The Second Mortgage Company

Types of Secured Loans in the UK


There are various types of secured loans in the UK that people can apply for to fulfil all nature of financial needs. A secured loan is a type of loan which by its very nature a valuable asset is ‘secured’ against the loan and is used as collateral if the borrower fails to keep up with repayments. Secured loans are different to guarantor loans, which require a person to act as a guarantor for the loan, providing an additional element of security.

A secured loan can be a great way of accessing the finance you need. However, they do come with a substantial amount of risk. It is therefore vital to ensure you can keep up with your required repayments on the loan. Failure to do so can result in losing your house, and having assets or your property repossessed. Alternatively, any other valuable assets you will have secured to the loan are of course at risk in much the same way.

What Assets Can I Use For Secured Loans?

You can secure different types of valuable assets to a secured loan, although requirements for the asset(s) in question can vary from lender to lender. Some of the most commonly used high-value assets as security for a secured loan include:

  • A property (house, flat, bungalow)
  • A car
  • Jewellery
  • A piece of art

Secured loans can be used in many different ways, such as consolidating debt, making home improvements, or buying a house. What you can use a secured loan on will depend on the lender and the loan type.

What Types of Secured Loans Can I Apply For?

There are a variety of secured loans in the UK to choose from, each of which help to finance a range of different circumstances. Some of the main types of secured loans available in the UK include the following:

Homeowner loans – a homeowner loan enables you to borrow money against your property, with repayments required monthly. Homeowner loans can be used to make home improvements, pay off bills, consolidate debt and more

Mortgages – a mortgage is another popular type of secured loan where you can borrow up to 90-95% of a property’s value in order to pay for said property. Repayments for this are made on a monthly basis

Second mortgages this is a type of homeowner loan where you can borrow money from a lender using your property as collateral. This loan can be used in a range of different ways. If the early repayment charges on your current mortgage are high, it may be cheaper to take out a second mortgage instead of remortgaging

Bridging loans – these types of secured loans are used to “bridge the gap” between buying a new home and selling an old one. These types of loans are taken out over a considerably shorter period compared to other secured loans

Understanding the different types of secured loans available to you can make it easier to find the one that is right for you. Whilst all of the secured loans mentioned above require a property as the valuable asset, there are many others which allow other types of assets to be secured on the loan.

For example, you can use a secured loan to purchase a car, using the car as collateral if the borrower fails to make repayments.

What Type of Secured Loan Should I Get?

The type of secured loan you choose should be based upon what you need the loan for and the valuable asset you can provide as collateral. For example, people who are looking for a viable loan to pay for a new property, will likely turn to a mortgage or bridging loan of some nature. They will need to look into the detail though of any options as whether they acquire a mortgage or a bridging loan, it will be secured in these cases on their property, often their main residence. It is this level of risk with secured loans that must be judged and assessed.

For those looking for secured loans in order to access the capital to undertake home improvements, consolidate existing debts debt, pay of monthly bills or manage unexpected financial emergencies (for example, your boiler breaking) you won’t necessarily need a property to secure these loans. Rather, you may well be able to use other valuable assets such as a car, a piece of art or jewellery. However, in some cases, you may be able to borrow smaller amounts on an unsecured basis too.

Requirements for the valuable asset you can secure on your loan will vary depending on the lender, the type of loan, and your own personal details and circumstances. Whilst some people can get a secured loan with bad credit, mortgages usually require the borrower to have a good credit rating as well as other credit-worthy credentials, so it is worth considering improving your credit rating.

What Are the Eligibility Criteria for Secured Loans?

The eligibility criteria for an unsecured loan will vary between lenders and the loan type. For all secured loans however, you will of course have to possess a valuable asset that meets the requirements of the lender you are applying with.

Additionally, you will very likely need to possess and demonstrate other desirable qualities which help prove to the lender that you are a viable lending prospect and are capable of keeping up with the repayments on the loan. You should be able to demonstrate:

  1. A good credit rating
  2. Being employed
  3. Having a stable income
  4. Being over the age of 18
  5. Being a UK resident

Whilst some lenders may require a good credit rating, others may simply use the valuable asset as security that the loan will be repaid as having that asset as security reduced the risk to the lender of not recouping any money they don’t get back. It is important to understand the eligibility criteria for any potential loans and ensure you meet these requirements before making an application.

As a mortgage is secured against your home, your home could be repossessed if you do not keep up the mortgage repayments. Think carefully before securing other debts against your home.

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