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A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to satisfy the debt by regaining the amount originally lent to the borrower. From the creditor's perspective this is a category of debt in which a lender has been granted a portion of the bundle of rights to specified property.

The opposite of secured debt/loan is unsecured debt, which is not connected to any specific piece of property and instead the creditor may satisfy the debt against the borrower rather than just the borrower's security.

Advantages of secured loans

• Secured loans are simmple to obltain if you have equity in your property. Unsecured loans are almost always cheaper for those with decent credit scores, but secured loans provide lenders with, well… security, so they're more willing to lend to poor credit scorers.
• Large  borrowing is possible with secured loans.  The maximum unsecured loan is £25,000 yet secured loans can be £75,000.
• Secured loans provide borrowing over a longer period. Secured lenders prefer loans to last longer to help offset hefty set-up costs, usually from five to 20 years.  Unsecured lending is usually one to seven years.  Borrowing for longer does reduce the monthly repayments, but substantially increases the total interest repaid.

Disadvatages of secured loans

In recent years, reports in the media have raised concerns about the use of secured loans. The worry is that many people are tempted to consolidate unsecured debt into secured loans, usually secured against their home.

Although the monthly payments can often be lower, the total amount repaid is often significantly higher due to the long period of the loan. Debt consolidation sometimes only treats the symptoms of debt and does not address the root problem. In some circumstances, snowballing debt may be a better solution.

There are other alternatives to a debt consolidation loan, where unsecured debt is not "shifted" to secured debt, but is eliminated through a settlement or payment plan. Debt consolidation can be confusing for many people, so it is helpful to learn about all of your options, and sometimes with the help of an advisor.

Alternatives to secured loans

IVA - Individual Voluntary Arrangement

The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health.

Bankruptcy

Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. A first time bankrupt with debts will generally receive their discharge one year after the date of the bankruptcy order

Debt Management

Are you struggling to pay credit cards, loans, store cards or catalogues? Would you like someone to help sort out your payments and talk to creditors for you? Would you like to be able to pay one affordable amount to all your creditors each month? If this sounds like you, a Debt Management Plan may be just the thing

Debt Consolidation loan

Consolidate debt and reduce your monthly outgoings by up to half with a debt consolidation loan

Trust Deeds in Scotland

A trust deed or protected trust deed is a legally binding debt repayment agreement for residents in Scotland who have debts above £8000. The trust deed or protected trust deed is only available in Scotland and lasts no longer than 3 years. After this period the remainder of the debt is written off leaving you absolutely debt free.

Advice on secured loans

when you consolidate your existing credit agreements it is important to make sure you have enough money each month to pay the household bills. Debt repayments must be budgeted for in the same way as household bilss for this reason work a budget by completing a debt budget calculator. If you are in debt, with an accurate budget, you'll be able to cut out unnecessary expenses and save money, or stop running up big debts. If you already have debt problems, a budget will show you how much spare cash you have. This will help when you talk to your creditors (those you owe money to), because you'll be able to make realistic offers to pay them back over a period of time.

Whatever the reason you might wish to consolidate your debts we will find a solution for you by calling 0845 612 2626.