Best Secured Loan Providers & Sites in 2021

The UK loan arena typically consists of two main loan types – secured loans and unsecured loans. Regarding the latter, this where you are able to borrow the funds without needing to put any assets up as collateral. As such, there is no risk of you losing your assets in the event that you default on the loan. On the contrary, a secured loan requires just that – you’ll be required to put an asset up as security in order to obtain the money. As such, you face the very real risk of losing the security if you fall behind on your repayments.

However, if you’re currently in a position where your credit profile is less than ideal then you might have no other option but to obtain a secured loan, as lenders require this in order to offset the higher risks. With that being said, we have created the ultimate guide to the Best Secured Loans of 2021. Within it, we’ll tell you everything that you need to know – such as what a secured loan is, how it works, what you need to look out for, and what risks you face by putting an asset up as security.

Pros and cons of secured loans

Reviewer’s choice of best 3 secured loan providers

Best 3 secured loan providers

If you have read our guide on secured loans up to this point, then you should now have a good understanding of what’s involved. Most importantly, it is hoped that you have a firm grasp of the underlying risks of taking out a secured loan – especially when it comes to default.

Nevertheless, if you believe that you have the financial means to meet your loan repayments each and every month and thus – you want to proceed with a secured loan application, we have listed the top three providers below. Before we do, be sure to look at the main criteria we use when ascertaining which lenders to recommend.

Criteria used to rank the best secured loan providers

• Lenders with the most competitive interest rates
• How much the lender is able to offer
• What credit score you need to obtain the personal loan
• What assets you are required to put up as a security
• What the late payment and missed payment process is

 

What is a secured loan?

In its most basic form, a secured loan is a type of loan that requires you to put an asset up as security in order to obtain the loan. In the vast majority of cases, this will either be a car or property that you own. As we will discuss in more detail further down, secured loans can be tailored to a range of financing needs – such as borrowing a larger amount of money, borrowing funds with a less than ideal credit score, or obtaining a cheaper rate of interest.

While these benefits make secured loans somewhat attractive, it is crucial to remember that you face the risk of having your security repossessed if you fall behind on your payments. While the repossession process is no easy feat for lenders, they will not hesitate to do this – especially considering the potentially large size of the funds owed.

In terms of the specifics, the actual loan process is very similar to that of a conventional unsecured loan, insofar that you will likely borrow a fixed amount, at a fixed rate of interest. As such, you will be making your repayments to the same amount each month, on the same date of each month.

Types of secured loans

The term secured loan is a somewhat broad one, not least because it can cover a wide range of loan types. The specific loan that you opt for will, of course, depend on your individual circumstances – such as how much you need to borrow, and what assets you have to secure against the loan.

With that being said, we’ve listed the most common types of secured loans below.

How much do secured loans cost?

There really isn’t a one-size-fits-all answer to how much a secured loan is going to cost you, as there are simply too many variables to take into account. Not only will this include your individual credit profile and historical relationship with debt, but also the type of secured loan you opt for and the collateral you put up as security.

Nevertheless, the give you an idea as to some of the key metrics that will determine how much your secured loan is going to cost you, check out the following list.

i) Your Credit Score

First and foremost – and as is the case with all loan types, the lender will need to assess your credit report. Your credit report contains a wealth of information about your financial well-being, such as who you currently have credit with, who you have previously held credit with, and most importantly, how responsible you are with making your repayments. With that being said, your APR rate will be determined by the health of your credit score. In other words, the higher your credit score at the time of the application, the lower your APR rate is likely to be.

ii) The type and value of your asset

The cost of your secured loan will also depend on the type and value of the asset that you are required to put up as collateral. For example, if you own your home outright with the underlying mortgage cleared in its entirety, then you are likely to benefit from industry-leading rates. This is because the risks afforded to the lender are super-slim, as they will always have the safety net of your property held as security. Moreover, the value of your house is likely to increase year-on-year, so there are no risks on the asset depreciating. In fact, some homeowner loan lenders are now offering loans of 95% LTV at rates of less than 4%, which is very competitive indeed.

At the other end of the spectrum, you likely won’t benefit from the same competitive rates if you are putting up a car as collateral. Not only will the re-sale value of the car be much lower than that of a property, but vehicles lose value over time. As a result, lenders are typically going to charge a higher rate of interest. On the other hand, if you are only borrowing a very small percentage against the market value of your car, you might be able to obtain a more favourable rate of interest.

iii) How much you borrow and for how long

As is the case with most loan types, the size and term of your loan agreement will also dictate how much you end up paying on the loan. In a nutshell, lenders base their APR rates on the age-old Risk vs Reward theory, meaning that the more risk they foresee, the more interest they will require on the loan. As such, the more money that you borrow from the lender, the more they will charge.

Furthermore, this theory also remains constant as the length of the loan term increases in size. This means that the longer that you decide to borrow the funds for, the more interest you will likely pay. This is because the risk of you falling behind on the loan increases in-line with the length of the loan term.

What happens if I fall behind on my secured loan?

First and foremost, it is important to note that you will not lose your house or car simply because you miss a payment. This is a last resort course of action for lenders, so the initial stages of late or missed payments will follow the same process as seen with unsecured loans. As such, the typical three-stage process starts with a late payment, to a missed payment, and then to a default.

Here’s a quick breakdown to what happens when you fall behind on a secured loan.

Glossary of loaning Terms

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