Secured Loan

Money using your property as collateral

A secured loan gives you a better interest rate, larger borrowing facility and longer repayment periods than an unsecured loan. That's because if you don't keep up repayments, you can lose your home. An opportunity for the prudent, a dance with the devil for the financially frivolous.

A simple definition: a secured loan means that although you are borrowing money, you have enough specific property of your own, identified in your contract with the bank, for the bank to legitimately confiscate to cover the cost of the loan if you default on repayments. Usually that means your house, but loans can have anything as collateral. That of course sounds horrible, so "secured loan" is the preferred term! Its opposite is an unsecured loan, and they cost more in interest, because the bank is taking a higher risk- lending to you without any guarantee that you will put any of your property up as collateral against the loan.

Secured loans generally become useful at higher lending amounts and across longer periods, and you should seriously consider a second mortgage. Indeed, with companies like the Halifax and Abbey National, there's not much difference between a secured loan and a second mortgage. A secured loan will also attract very low interest rates, if property prices rise, you can effectively be borrowing without penalty, and often you can borrow very close to 100% of the value of your property.