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This type of loan can offer lower interest rates and higher borrowing limits. Examples of secured loans include mortgages and home loans.
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Secured loans allow you borrow money by using an asset you own – usually a property – as collateral. If you’re unable to keep up with repayments, the lender has the right to repossess and sell the asset to recover the outstanding loan amount.
These loans are often ideal for borrowing larger sums of money and typically come with either fixed or variable interest rates, depending on the loan agreement and type.
Secured loans typically allow you to borrow more than unsecured loans. The amount you can borrow depends on factors such as:
The loan-to-value (LTV) ratio – the size of the loan compared to the value of your home – also plays a role.
Use our calculator to estimate how much you could borrow based on your income.
Secured loans often come with lower interest rates because the lender has the security of the asset. However, the rate you’re offered depends on:
If you have a low credit score, some lenders may be more willing to approve a secured loan compared to an unsecured one. However, if your financial situation suggests you may struggle with repayments, you might still be declined.
Check your credit report and work on improving your credit score before applying. A higher credit score can improve your prospects of getting a mortgage and help you secure better loan terms.
Any late or missed repayments can negatively impact your credit score and your ability to borrow money in the future. When the loan is secured against your property, you also run the risk of losing your home.
When taking out a mortgage, it’s important to work out what you can comfortably afford, including any additional costs of owning a home.
Use our mortgage repayment calculator to find out what your repayments might be, and how that may impact your monthly budget.
Some secured loans, like variable-rate mortgages, have interest rates that can fluctuate. This means your repayments could increase or decrease over time.
In contrast, fixed-rate mortgages offer consistent monthly payments for a set period, regardless of market interest rate changes.
A mortgage is a long-term agreement. Although your monthly repayments on a secured loan could be lower than an unsecured loan, you might be paying it off for 25, 30 or even 35 years. The longer you take your mortgage, the more interest you’ll pay overall.
Think carefully about securing debts against your home.
Your property may be repossessed if you don’t keep up the repayments.
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