5 Key Things to Consider Before Applying for a Secured Loan

A secured loan enables you to take out a loan by using some form of collateral (e.g. your home or other property) as a guarantee. Depending on your individual circumstances, secured loans can be easier to obtain than unsecured loans, as there is less risk to the lender. However, if you fail to make repayments on your secured loan, you could lose your home, car or other possessions, which means that you must think carefully before taking out a secured loan. Here are 5 key things to consider before applying for a secured loan.

Loan Amount

The amount of money you want to borrow will affect the type of loan you need. Credit cards, if used a correctly and the balance is paid down every month, can usually work out cheaper for borrowing small amounts of money, and there is no risk of losing your property. For larger sums of money, unsecured loans and secured loans are available to suit a range of personal circumstances. Depending on your financial circumstances and credit rating, you may find it difficult to obtain an unsecured loan, particularly if you need a large amount of money. Secured loans are much more readily available and may be the only option for some people.

Credit Rating

If you have a bad credit rating or poor credit history, you may find it almost impossible to obtain an unsecured loan, as lenders will consider you to be at high risk of defaulting on your payments. However, loan providers like Creditlink offer secured loans to suit people with a poor credit history, including those with a County Court Judgement (CCJ) against their name. If you are struggling to find a loan because of bad credit or a poor credit history, visit Creditlink to see if they can help.

Loan Repayment

Secured loans often work out more expensive than unsecured loans, especially if you choose to pay the loan back over a long period of time. Before signing up to any loan, make sure you know exactly how much you will be paying back. The total cost of your loan will depend on a number of factors, including the interest rates, amount borrowed and length of time you require to pay back the loan. Consumer advice website Which.co.uk provides helpful advice for working out how much your loan will cost.


All secured loans come with an element of risk, as you are using your property or possessions as collateral to guarantee repayments. If you fail to keep up with your loan repayments, you could lose your home, property or possessions. Consider the implications of defaulting on your loan repayments before making a final decision on which loan to choose.

Terms and Conditions

Before agreeing to any loan, always read the terms and conditions carefully. Pay special attention to any hidden charges or fees, such as late payment charges, as these can quickly mount up. If you intend to pay back your loan early, check your loan agreement carefully, as early repayment is not possible with many secured loans.

Secured loans can be the ideal solution for people who have been refused credit cards or unsecured loans, as lenders are more inclined to loan money to people with collateral to offer as a guarantee of payments. However, always check the details, terms, conditions and small print associated with your loan before signing an agreement.

Ceri Harris is a personal finance assistant. Blogging gives her the opportunity to share her ideas and insights.

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