Use your assets as security collateral to get access to fast finance
Secured Loans
If you want to save money on a secured borrowing product such as an affordable homeowner loan or a competitive second charge mortgage, then use our quick and easy online secured loan repayment calculator.
No matter your financial situation, Donkey Finance makes it easy to compare different types of secured loans from a variety of lenders. Our service covers everything from personal loans to business loans, and you can use our online calculator to find the best rates, even if you have bad credit.
What Are Secured Loans?
Secured loans, often referred to as homeowner loans, are long-term loans backed by an asset, like your home or car. This means that if you don’t make your payments, the lender can take the asset. These loans typically start at £25,000 and can go up to £250,000, depending on your property’s equity, income, and credit history. We’re open till late, making it convenient for you to explore your options whenever it suits you.
Making the Right Choice
If you have a good credit score, you can get secured loans with low interest rates, usually between 5% and 10%. If your credit is bad, the interest rates might be higher, but secured loans are still an option since the collateral reduces the lender’s risk. These loans are repaid in monthly installments and can be used for various purposes, including buying cars, home improvements, debt consolidation, or even financing major events like weddings.
Let our loan search tool compare rates for secured loans against high-street banks and other institutions:
Secured loan products
- Nonrecourse Loans: Nonrecourse secured loans offer limited liability to the borrower. With all types of secured loans, the borrower risks repossession of his or her collateral if he or she stops making payments. The lender may then seize and sell the asset to recoup their losses. With a nonrecourse loan, after seizing the asset, the borrower’s obligation is fulfilled. If the sale of the asset does not cover the remaining balance of the loan, the borrower is not required to pay the remaining balance.
- Mortgages: Home loans are mortgages. In fact, these two terms are often used interchangeably. However, a mortgage is not always a home loan. An individual may obtain a second mortgage when he or she needs access to more funds. Homeowners who tap into their equity with home equity loans are obtaining second mortgages as the loans are secured with the homes. Business owners may also take out mortgages to fund their business operations. This loan is still considered a mortgage, even though it was not obtained for the purpose of buying a home.
- Home Loans: Most home loans are secured loans, as homes are often the biggest asset that people ever purchase. To reduce the risk to the lender, they need security. The home loan is typically secured with the home itself.
- Car Loans: Car loans are secured loans that are secured with the car being purchased. If the borrower stops making payments, the lender can seize the car.
- Boat or RV Loans: Besides cars, people can get secured loans to purchase any type of vehicle. There are loans for boats, recreational vehicles, motorcycles, and other types of transportation.
- Secured Personal Loans: Personal loans may be secured or unsecured. With a secured loan, borrowers may qualify for better interest rates. A secured loan may also be needed for those without good credit. These details also apply to secured personal credit cards. In fact, bad-credit loans are typically secured loans. These loans often require the borrowers to use their homes as collateral. However, some lenders may accept vehicles as collateral if the value of the vehicle covers the borrowing amount.
- Secured Business Loans: Secured business loans may be used for a wide variety of purposes. A variety of types of collateral may also be used to secure the loan. Businesses that take out loans may secure the loan on their real estate holdings, land, equipment, machinery, and other valuable assets.
Secured homeowner loans and second-charge mortgages
With UK borrowing restrictions now tighter than ever, many applicants experience tremendous difficulty in terms of being approved for unsecured personal credit. However, if you are a homeowner and you are looking to borrow a substantial amount of money, from £25,000 upwards, there is a far cheaper alternative offering improved repayment flexibility and much higher rates of approval, even if your credit rating has let you down in the past.
Secured homeowner loans, which are sometimes known as second-charge mortgages, are long-term borrowing products that are secured against a homeowner’s property. If you own the property outright, you can typically borrow anywhere up to 80% of the open market value of your home, provided you are willing to risk your home on the off chance that you will be unable to make the repayments at some point in the future.
If the property is already mortgaged, your homeowner loan will be secured on a second-charge basis against any remaining equity once the outstanding mortgage amount has been subtracted from the value of your property. Although there will always be some level of risk involved, there are a number of actions you can take to reduce the chances of this happening. First of all, always make sure that you borrow responsibly and within your means.
You should never take out a secured loan that you cannot realistically afford to pay back, and a responsible lender will always check to ensure you can afford to pay back what you borrow as part of the application process itself. Secondly, there are a number of payment protection plans available that can be added to your loan product as insurance against ill health, loss of employment, and death.
Secured loans for individuals and businesses
Mortgages are the most common types of secured loans. However, there are many different types of secured loans, including loan products designed specifically for businesses or individuals. A secured loan is just a loan that includes some type of security, such as a home. Other than real estate property, loans may be secured with almost anything of value.
Benefits of secured loans for lenders and borrowers
Lenders enjoy secured loans because they are low-risk investments. They get to collect interest during the life of the loan with less risk that the borrower will default. Due to the risk of losing the collateral, people often prioritise secured loans over unsecured loans. If the borrower does stop paying on the loan, the lender may sell the asset. This puts more pressure on the borrowers to pay their loans on time.
When to consider a secured loan
If you live in a mortgaged property that you own and you are looking to borrow a substantial sum of money, in the region of £25,000 to £250,000, you might be able to gain access to these funds by remortgaging or switching providers. However, you might already have an affordable mortgage product with low repayments in place, which would make this an impractical option from the start.
Additionally, some residential mortgages have hefty exit fees and early repayment charges, and in situations such as this, many people prefer to take out a second mortgage or secured homeowner loan instead. A homeowner loan is an affordable borrowing product that can be used for a large number of helpful reasons.
Popular uses include home improvement (which can add serious additional value to your property), debt consolidation (lowering your monthly outgoings and improving your finances), and covering the cost of purchasing a new family car, paying for a holiday, or financing a wedding.
As long as you have sufficient equity in your property, a secured homeowner loan is one of the cheapest types of finance available, and the repayment terms can be structured to fit your personal finances flawlessly. Unlike personal loans, which are only available to those with a good credit rating, homeowner loans are suitable for all manner of applicants, including the self-employed (with no proof of income) and even those with CCJs.
For more information about secured homeowner loans, second-charge mortgages, or any other type of property finance, call now and speak to one of our FCA-authorised borrowing experts. With a choice of over 100 lending facilities and access to dozens of different loan products, we will find you the most competitive borrowing option with the lowest rates and costs.
Collateral security vs. additional security
Most secured loans either use additional security or collateral security. Collateral security refers to loans where the security is the item that is being purchased. With a car loan, the car is the security. When buying equipment for a business, the equipment is the collateral. Additional security is used to secure additional funding or lower interest rates.
Businesses may use this option when applying for business loans to fund expansion or their starting costs. The additional security typically comes from real estate properties, such as a building or land. Within these categories, there are many types of secured loans, including mortgages, car loans, boat loans, and secured personal loans.
Examples of Secured Loans
- Home Improvement: A homeowner uses a £50,000 secured loan at 6% interest over 10 years to renovate their home, increasing its value.
- Debt Consolidation: Someone consolidates high-interest debts with a £30,000 secured loan at 5% interest over 7 years, simplifying their payments and reducing overall costs.
Understanding the Risks
Secured loans require you to use an asset, like your home or car, as collateral. If you miss payments, you could lose that asset. While there are less risky options, like credit cards or personal loans, secured loans might offer lower interest rates, making them a better choice for some borrowers. Our online calculator can help you compare these options to see what works best for you.
Other Options to Consider
- Use Your Savings: If you have savings, consider using them to pay off debt instead of taking on new loans.
- Credit Cards: Sometimes, credit cards with lower interest rates can be a better option than a secured loan, especially if you find a good balance transfer deal.
- Debt Shuffling: If you have multiple credit cards, you can move your debt to the ones with the best rates to save on interest.
- Remortgaging: Refinancing your mortgage could lower your interest rate, though it might extend the term of your loan.
Get Help If Needed
If you’re struggling with debt, talking to a debt counsellor can help you explore your options and create a plan to pay off what you owe.
Paying Off Secured Loans
It’s crucial to keep up with secured loan payments to avoid losing your collateral. Missing payments on unsecured loans can also hurt you, but secured loans put your assets at risk. If you’re unsure about which loan is best for you, our team is open till late to help you compare your options and make an informed decision.
What is the difference between secured and unsecured loans?
Secured loans are provided on the basis of collateral. By contrast, unsecured loans do not require the borrower to provide collateral to cover the cost of the loan. Instead, unsecured loans are granted on the basis of the borrower’s credit score, financial status, proof of income, employment history, and so on.
As a result, applying for and successfully receiving an unsecured loan can be more difficult and time-consuming. Irrespective of collateral or otherwise, a credit check alone could be enough to exclude an applicant from consideration. Poor-credit unsecured loans are available, though they typically have excessively elevated overall borrowing costs. Unsecured loans are provided subject to status, with interest rates and overall costs varying from one applicant to the next.
If the applicant is self-employed, has a poor credit history, or is unable to provide proof of income, an unsecured loan may be out of the equation. In addition, unsecured loans are typically offered in smaller sums, perhaps up to a maximum of £20,000.As the applicant isn’t required to provide collateral to secure the loan, their property is not at risk in the event that they fail to repay the loan as agreed.
What is a good secured loan rate?
A good secured loan rate is between 4% and 8% APR for a loan term of 5 to 7 years. However, the best rate you can qualify for will depend on your credit score, the amount of equity you have in your home, and the lender you choose. You can shop around for the best rate by comparing offers from multiple lenders.
How risky is a secured loan?
Secured loans are less risky for lenders than unsecured loans because the lender has the right to seize the collateral if the borrower defaults on the loan. This makes secured loans more attractive to lenders, which is why they typically offer lower interest rates than unsecured loans. However, secured loans also pose a greater risk to borrowers, as they could lose their collateral if they default on the loan. Therefore, it is important for borrowers to carefully consider their financial situation before taking out a secured loan.
What is the most common secured loan?
The most common secured loans are mortgages and car loans. Mortgages are loans that are used to finance the purchase of a home, and they are typically secured by the home itself. Car loans are loans that are used to finance the purchase of a car, and they are typically secured by the car itself.
What banks offer secured personal loans?
Secured personal loans are surprisingly difficult to track down on the UK high street. In fact, there are only a couple of names, such as Masthaven Bank and Shawbrook, that provide access to flexible and convenient secured personal loans. Mortgages and similar home loans are widely available, but all-purpose secured personal loans are much thinner on the ground. As a result, it’s always advisable to look beyond the High Street if considering applying for a secured personal loan.
There are dozens of independent lenders across the UK that specialise primarily or exclusively in these kinds of loans. As a result, they’re often able to provide secured personal loans with much more competitive overall borrowing costs than their high-street counterparts. In addition, specialist lenders are far more flexible and accommodating when it comes to subprime applicants. If you have poor credit or you’re unable to provide proof of income, you’re unlikely to qualify with a major lender.
With independent secured loan specialists, all that matters is covering the cost of the loan with acceptable collateral. This is ideal if you are looking to borrow a considerable sum while dealing with an imperfect credit score.
How do I apply for a secured loan?
Applying for a secured homeowner loan with Donkey Finance could not be easier. Once you have worked out how much you can realistically afford to borrow and pay back, you can either use our online application form and request a call back or get in touch with one of our FCA-authorised advisors directly over the phone and let them guide you through the entire process.
Once the first stage of your application is complete, we will search the entire market on your behalf in order to ensure you get the most competitive deal based on your individual needs and borrowing criteria.
Will I be accepted for secured finance?
Provided you are a UK resident, aged 18 years or older, and either own your home outright or you have a mortgage and there is enough equity left over to act as security for the loan, your chances of being approved for a secured loan with Donkey Finance are actually quite high. Even if you have had cash flow problems in the past or are self-employed and have found it difficult to obtain finance elsewhere, we will search the entire market to find the most suitable product for your needs.
What happens when you are approved?
A decision can be made in a matter of minutes, and once your application has been approved, there is very little paperwork involved, and the funds can be transferred directly to your bank account in a matter of weeks or days. Even if you have been turned down for credit in the past, because the loan is secured, you still have an excellent chance of being approved. However, it is important to realise that there is a very realistic probability that your home will be repossessed if you deliberately avoid repaying the debt or miss a number of payments owing to unforeseen circumstances.
Of course, this only happens as a last resort, and the vast majority of lenders will always work with you in order to resolve the issue of non-payment in the most amicable manner.
Are there risks with secured loans?
Unfortunately, many people choose to get secured loans without considering their other options. In some situations, an unsecured loan may provide a better solution. However, there are also times when lenders can receive a “charging order” to sell your home to recoup their payments on an unsecured loan.
The charging order does not automatically give lenders the right to repossess your home. They still need to complete another court filing. However, unsecured loans still make it harder for lenders to repossess your property compared to secured loans. Basically, a secured loan carries a risk to the borrower while lowering the risk for the lender.
What is the advantage of obtaining a secured loan?
Why do people risk their possessions for a loan? By offering collateral, lenders consider you at lower risk of failing to make your payments. As a lower-risk investor, you get lower interest rates and better deals. For those with low credit scores, a secured loan may be easier to get. However, those with good credit scores can often get better deals with unsecured loans. Along with providing a lending solution for those with bad credit, secured loans offer larger borrowing limits.
Secured loans are also often available with longer terms. Instead of needing to pay off your loan in one to seven years, you may get up to 20 years to pay off a secured loan. Keep in mind that increasing the term increases the total interest that you pay during the life of the loan. Loans are either secured or unsecured. Determining which option is right for your financial situation depends on your credit history, how much you want to borrow, and what you have available for collateral.
How do lenders determine interest rates?
The interest rates that you see advertised are not available to everyone. Your credit history and available equity or collateral impact the interest rates on your loan. Lenders also consider the size of the loan and the term. Lenders also develop loan products designed for different types of borrowers.
One lender may have the best option for those with bad credit, while another offers great deals for those with lots of equity. Many consumers do not fully understand how their credit scores are determined. If you know what is included in credit reports, you may take steps to improve your credit standing. You can pay down the debts that have the biggest impact on your credit score.
Your overall credit history includes a detailed look at your outstanding debts, including loans that you defaulted on. Your credit history also includes court orders related to payment failures and bankruptcies. These details influence your borrowing power. Equity also plays a role in how much you can borrow and the rates that you get. The value of your property minus the amount that you still owe on your mortgage equals your available equity.
Based on the details discussed, lenders will review your application and propose an interest rate. However, before you accept it, there are still a few more costs to consider. The application processing fees, legal fees, and various additional charges for your secured loan should be included in the final interest rate. The final interest rate is the APR. While you should compare APRs from multiple lenders, you also need to compare the cost of payment protection insurance (PPI).
Do you need payment protection insurance?
Another detail that impacts the total cost of secured loans are insurance that protects both you and the lender. PPI covers your payments if you get into an accident or become unemployed. PPI is not often included in the APR. Multiply the total monthly payments, including the PPI, times the length of the loan. Always compare at least three options before selecting a loan product, or use a loan broker for assistance in comparing options.
How can Donkey Finance offer the UK’s lowest secured loan rates?
By working closely with dozens of leading lenders across the UK, we provide exclusive access to the lowest secured loan rates on the market. By carrying out a comprehensive interest rate comparison for every customer, we’re able to pinpoint the perfect products to suit all requirements and budgets.
Donkey Finance operates as a different kind of comparison site, simplifying the process of tracking down high-quality secured loans for all purposes. For more information or to discuss your requirements in more detail, contact a member of the Donkey Finance customer support team today.
