Secured Loans UK Guide (Homeowner Loans, Rates, Risks)

How Secured Loans Work

A secured loan works by using your property as collateral. The lender registers a second charge on your property's title at the Land Registry (the first charge being your main mortgage). This gives the lender a legal interest in your home until the loan is repaid. Secured loan amounts typically range from £5,000 to £100,000 or more, with repayment terms from 3 to 30 years. The interest rate can be fixed or variable. Fixed-rate secured loans lock in the interest rate for the full term, providing predictable payments. Variable-rate loans fluctuate with the Bank of England base rate or the lender's standard variable rate (SVR). The amount you can borrow depends on: the equity in your property (your home's value minus any existing mortgage), your income and affordability, your credit score, and the loan-to-value (LTV) ratio — most secured lenders allow borrowing up to 80% LTV combined with your existing mortgage (meaning total borrowing secured against the property cannot exceed 80% of its value). Secured loans are regulated by the FCA under the Mortgage Credit Directive. Lenders must assess affordability, provide a European Standardised Information Sheet (ESIS), offer a 14-day cooling-off period, and follow strict rules if you fall behind. Secured loans are also covered by the FSCS (up to £85,000 per person per institution), unlike most unsecured loans.

Rates and Fees

Secured loan interest rates are significantly lower than unsecured personal loan rates because the debt is secured against your home. In 2026, typical secured loan APRs range from 5% to 15%, compared to 3–30% for unsecured personal loans (the overlap occurs because borrowers with excellent credit can sometimes get unsecured rates that match secured rates). Fees on secured loans can be substantial: arrangement fees — typically 1–5% of the loan amount, often added to the loan balance. On a £30,000 loan, a 3% arrangement fee costs £900. Valuation fee — £200–£500 for a property valuation (required to assess LTV). Legal fees — £300–£1,000 for the conveyancing work of registering the second charge (sometimes covered by the lender). Early repayment charges (ERC) — significant penalties for settling the loan early, often 1–3 months' interest or 1–5% of the outstanding balance, decreasing over time. Exit fees — £50–£300 when you repay the loan in full. Broker fees — if you use a broker, they may charge a fee (typically £500–£1,500) or receive commission from the lender. Because the upfront costs are higher, secured loans are most cost-effective for larger borrowing amounts (£10,000+) over longer terms. For smaller amounts under £10,000, an unsecured personal loan is usually cheaper despite the higher APR, because the fees are lower or zero.

When to Choose a Secured Loan

Secured loans are suitable for specific situations. Large borrowing amounts (£10,000–£100,000) — unsecured loans cap at £25,000 for most borrowers. If you need more, a secured loan is the main option. Home improvements that add value — extending your home, renovating a kitchen, or converting a loft can increase your property's value, making a secured loan a logical choice. Debt consolidation for large debts — if you owe £15,000+ across high-interest credit cards and loans, a secured consolidation loan can reduce your monthly payments and total interest. Lower APR for fair credit borrowers — borrowers with fair credit (Experian 721–880) may face 15–30% APR on unsecured loans but could access 7–12% on secured loans. Business investment — secured loans can fund business expansion at lower rates than business loans. Secured loans are not suitable for: small borrowing amounts (under £5,000), short-term borrowing (under 3 years), borrowers without sufficient home equity, or people who may need to move house during the loan term (the loan must be repaid when the property is sold, and ERCs may apply). Always compare the total cost of borrowing (including all fees) between secured and unsecured options. See our Secured vs Unsecured guide → for a detailed comparison.

Repossession Risk and Consumer Protections

The most significant risk of a secured loan is home repossession. If you fail to keep up with repayments, the lender can apply to the court for possession of your property. Under FCA rules, lenders must treat borrowers in financial difficulty fairly and consider forbearance options before resorting to repossession. These options include: payment deferral — a temporary pause or reduction in payments; term extension — extending the loan term to reduce monthly payments; capitalisation of arrears — adding missed payments to the loan balance; conversion to interest-only — temporarily paying only interest to reduce the monthly amount. If you are struggling, contact your lender as early as possible. Ignoring the problem makes repossession more likely. You can also seek free debt advice from StepChange, Citizens Advice, or National Debtline. The FCA's Mortgage Conduct of Business (MCOB) rules require lenders to have clear procedures for dealing with customers in arrears. Secured loans are also covered by the Consumer Rights Act 2015 and the Mortgage Credit Directive 2014. If you feel a lender has treated you unfairly, you can complain to the Financial Ombudsman Service (free of charge). The FSCS protects your loan balance up to £85,000 if the lender fails, though this is less relevant for borrowers than savers.

Secured Loans vs Remortgaging

If you need to borrow a large amount secured against your home, you have two main options: a secured loan (second charge) or a remortgage (further advance). A remortgage involves increasing your existing mortgage — you borrow additional funds from your current mortgage lender and add them to your mortgage balance. This is usually the cheapest option because you get the same interest rate as your mortgage (typically 4–7% APR) with lower fees (often no separate arrangement fee). However, remortgaging means you must stay with your current lender or pay early repayment charges to switch. A secured loan is a separate loan from a different lender, leaving your main mortgage untouched. This is useful if: you have a very low fixed-rate mortgage you do not want to disrupt, your current lender will not lend more, or you want a shorter repayment term for the additional borrowing than the remaining mortgage term. A mortgage broker can help you compare the total cost of remortgaging versus a secured loan. Generally, remortgaging is cheaper if your current lender allows it and your mortgage rate is competitive. A secured loan is better for flexibility if you want a different term, different lender, or cannot remortgage. See our Mortgage guide → for full details on remortgaging.

FAQs

What is the maximum LTV for a secured loan?

Most lenders allow total borrowing (mortgage + secured loan) up to 80% of the property value. Some go to 85% for low-risk borrowers. If your home is worth £300,000 with a £150,000 mortgage, you could borrow up to around £90,000 via a secured loan (80% × £300k = £240k minus £150k = £90k equity available).

Can I get a secured loan with bad credit?

Yes. Secured loans are often available to borrowers with poor credit because the loan is secured against your home. Interest rates will be higher (10–15% APR instead of 5–9%), and maximum LTV may be lower (60–70%). Specialist lenders consider CCJs, defaults, and IVAs.

What happens if I sell my house with a secured loan?

The secured loan must be repaid when you sell the property. The sale proceeds are used to pay off the main mortgage first, then the secured loan, and any remaining equity goes to you. Early repayment charges (ERCs) may apply if you sell within the ERC period.

How long does a secured loan take to complete?

Secured loans typically take 2–6 weeks to complete, depending on the lender, property valuation, and legal work. Specialist "fast-track" lenders can complete within 7–14 days. Unsecured personal loans are much faster (1–24 hours) because they do not require property valuation or legal registration.

Is a secured loan a mortgage?

Technically yes — a secured loan is a "second charge mortgage." However, the term "mortgage" is usually used for the primary loan used to purchase the property. Secured loans are typically for smaller amounts (relative to the mortgage) and shorter terms, though they can run up to 30 years.