A secured loan or ‘second charge’ is a personal loan that homeowners secure against the equity in their property. Typical uses include debt consolidation or necessary works on a property. There are several reasons why a secured loan may be useful.
- If your credit rating has worsened since taking out your first mortgage, remortgaging could mean you end up paying more interest on your entire mortgage, rather than just on the extra amount you want to borrow.
- If your mortgage has a high early repayment charge, it may be cheaper for you to take out a second charge mortgage rather than to remortgage.
- If you’re self-employed and are struggling to get some form of unsecured borrowing such as a personal loan. MoneySave Solutions has acess to a panel of lenders,who can source secured loans from a whole-of-market panel, which when combined covers a wide range of financial solutions.
The main difference is that a secured loan uses your home as 'security' against missed repayments. In other words, if you can't repay the loan, your home could be sold to make up for it. That's why you should only ever take out a secured loan if you know you can comfortably pay it back. As with your mortgage - a secured loan places your home is at risk if you don’t keep up the payments.