Secured loans are an arranged borrowing with a financial institution, such as a bank or building society, which is secured against the value of your home. Secured loans are also known as a second mortgage or second charge loan because it is a ‘second charge' on top of your ‘first charge' (your mortgage for example). It can also be referred to as an equity loan due to the fact it is a loan taken out against the equity of the borrower's home. Therefore, secured loans can only be taken out by a person who is classed as a homeowner. Homeowner loans, therefore, are the same as secured loans.

A secured loan is secured on your house. Not only does this give you an incentive to pay off the loan on time, but it also gives the lender additional security, so if you default on your repayments, they have not lost all the money they loaned you. The advantage to taking out a secured loan against the value of your property is that you can generally have a longer repayment period than with an unsecured loan. This can be for the remainder of the mortgage term if you are borrowing a large amount. Because the risk to the lender is much lower than if you had taken out an unsecured loan, you will get lower interest rates on the amount of money borrowed, reducing your overall repayment.

Those with a poor credit history can also apply for secured loans, and often have no difficulty being accepted provided they have collateral. For such people secured loans come in the form of a bad credit secured loan. Taking out a secured loan will not only assist the poor credit scorer in their financial crisis, but will also help them in approving their credit score. However, they have the disadvantage of paying a comparatively higher interest rate.

Being the most common loan, it can be used for any purpose. It is generally repaid up to a period of 25 years, however the repayment period may vary from person to person as it depends on the amount being borrowed. Secured loans are best suited when the person is in need of a large amount of money and wants a longer repayment period.

Depending on the value of collateral offered, the loan amount can range from £3,000 to £50,000. The lenders are not hesitant to offer a higher amount. If they are satisfied that the collateral is of a sufficiently high value, they may even consider lending £100,000 or more. The maximum LTV (Loan to Value) is typically 125% of your property's value, although this is dependent on your individual circumstances.

If you are thinking about taking out a secured loan it is worth considering the costs associated with it. Since collateral is under question, lenders have to satisfy themselves whether the value of collateral is sufficiently high or not. They may have to get your property valued, and this will incur some valuation charges. Solicitor's fees to prepare the legal agreement and the conveyance to the property site and office charges are also included in the cost of getting a secured loan.

One downside to secured loans is that not everyone can offer a security; hence, not everyone can get the loan. Another concern is that the borrower risks loosing their assets if they fail to make timely repayments to the creditors. Although, with these considerations aside, it is one of the best loan options that anyone can choose.

The process of getting approval for a secured loan takes a little longer than the unsecured ones. This is because the valuation of your property and the paperwork that has to be done in pledging the collateral takes time. Before a lender will make a loan offer, they are likely to consider a number of factors including your financial status, equity in the property, past credit history and any instances of mortgage arrears, defaults and county court judgements. All these formalities will be completed within a few weeks and you will usually hear the outcome of your application within 30 days of applying.

Secured loans are available today from a variety of lenders at a variety of interest rates. In taking out a secured loan you are effectively releasing capital that would otherwise have remained tied up in your property. A secured loan is a quick and convenient way to plug a short term financial need, for example, to go on holiday or extend or improve your home. In essence, a secured loan enables homeowners to unlock some extra cash by using their greatest asset – their home.

Secured loans are the best option available to borrowers as they can get the required amount at a lower interest rate. However, you should take care as to the amount you decide to borrow. Overburdening yourself with too large a loan may put you at risk of having your home repossessed if you cannot keep up the secured loan repayments.