The tide is turning for the public perception of secured loans, according to a study carried out by MoneyExpert.com. Traditionally, secured loans were viewed as undesirable due to the necessity of putting up collateral against the loan, which could mean that the borrower lost their property. Now, however, increasingly better rates are making more people re-evaluate the importance of this type of loan.

Sean Gardner, chief executive of MoneyExpert.com, says: ‘Historically secured loans were seen as something of a product of last resort. But these days they are far more attractive to homeowners who are looking for a competitive rate of interest. The best secured loan deals are actually cheaper than the average unsecured loan.'

MoneyExpert's research found that the average rate charged on unsecured loan of £15,000 is 8.44% whilst the rate for a secured loan for the same amount is only 5.9%. The website claim that they have seen an 85% increase in applications for secured loans during the last quarter.

Secured loans are set to become even more popular in the current financial climate with lenders slashing the availability of credit and cutting back people's card limits. The price comparison site Fool.co.uk found that 12% of people that they polled had had their card limits cut in the last few months although the percentage varied considerably between demographics. The figure amongst 34 to 49 year olds was higher at 17% whilst 18 to 25 year olds were three times more likely to have their limits increased.

David Kuo, Fool's head of personal finance, is concerned at the irresponsibility of this policy: ‘On the one hand, they are slashing credit limits to older consumers who have become accustomed to credit. But on the other hand, they are increasing credit limits for younger consumers at a time when we need to practice greater financial discipline.'

This is all a part of the dreaded credit crunch, which has hit many borrowers hard over the last few months. Lenders are becoming more and more stringent in their terms and conditions and refusing borrowers with weaker credit histories. Recently the web-based bank Egg have come in for close scrutiny after revealing that 161,000 of their customers will have their cards stopped within 35 days, although they claim that this was not due to the crunch but merely the result of a risk assessment. If this drastic action is reproduced across the high street then a secured loan will be the only viable option for many borrowers.

Ed Bowsher at Fool is keen to warn this potential new army of borrowers of the dangers in taking out a secured loan. His main concern is that secured loans do not curb people's overspending: ‘ The problem is that too many borrowers take out the loan and then carry on spending too much. As a result, the borrowers end up further in the debt mire. Our research suggests that secured loans normally make debt problems worse not better.'

However, he also recognises that this type of loan can be suitable for certain purposes if handled sensibly: ‘I think secured loans are a useful tool for people who wish to borrow prudently against their home. One example would be if you wanted to improve your home. Or if you wanted to buy another "big ticket" item.'