When unsecured debts pile up — credit cards, personal loans, overdrafts — some homeowners consider using the value in their property to consolidate and manage borrowing. Secured loans and homeowner loans (often provided as second-charge mortgages) can increase borrowing power and reduce monthly payments by stretching repayments over a longer term. But they carry a significant trade-off: the loan is secured against your home, so missed payments can lead to repossession. This guide explains how secured loans work in the UK, why people use them for debt consolidation, the risks involved (especially if you have bad credit), and how Money Debt & Credit can help you explore whether this option is sensible for your situation.
Money Debt & Credit works with FCA-authorised partners to deliver debt solutions. We help clients compare secured loan options and non-secured alternatives, and we have experience advising people with poor credit histories who are considering loans secured on their homes.
What Are Secured Loans (and Homeowner Loans)?
A secured loan is a borrowing where you offer an asset as security — most commonly your home — so the lender has a legal charge over the property. Because the lender can recover money by selling the asset if you default, secured loans are often easier to obtain and can carry lower interest rates than unsecured borrowing. In the UK, homeowner loans that sit behind your existing mortgage are typically second-charge mortgages (a “second charge”), and they are separate from your first mortgage. If your property were repossessed, the first mortgage lender is repaid before the second-charge lender.
Key features at a glance:
Important warning: the main risk is repossession — if you fail to make repayments the lender may repossess your home to recover the debt. Think carefully and get independent advice before using your home as security.
Why People Use Secured Loans for Debt Consolidation
Many homeowners consider secured borrowing when unsecured options are no longer viable or when a lower monthly payment is a priority.
More borrowing power and lower monthly payments
Secured loans typically allow higher loan amounts and can be repaid over longer terms (often 3–35 years depending on provider), which reduces monthly payments. Spreading repayments lowers immediate pressure on the household budget, but it usually increases the total interest paid over the life of the loan. That trade-off — lower monthly cost versus higher total cost — is central to deciding whether a secured loan is right for you.
Easier approval with poor credit
Because lenders have collateral, some will consider applicants with bad credit, making secured loans a possible route for people who struggle to get unsecured borrowing. However, lenders charge higher rates for higher perceived risk, and adverse credit still increases the chance of rejection or less favourable terms. Always check specialist lender criteria and be cautious about rate and fee differences.
How Do Secured Loans Work?
Understanding the mechanics helps you compare options and spot hidden costs.
Loan-to-Value (LTV) and equity
LTV expresses how much you are borrowing relative to your property value. Lenders set maximum LTVs; for top products this can be high but will vary by lender and loan purpose. The amount you can borrow depends on available home equity (market value minus mortgage outstanding) and the lender’s maximum LTV. Higher LTVs generally attract higher interest rates.
Term, interest rate and repayments
Secured homeowner loans can run for much longer than personal loans; some providers offer terms up to 20–35 years. Longer terms reduce monthly payments but increase the total interest paid. Check whether your lender applies fixed or variable rates, whether there are early-repayment charges, and how interest is calculated.
Application process & approval criteria
Typical steps:
Lenders check age limits, affordability over the loan term and any existing loan terms (especially if your first mortgage has early-repayment charges). Always read the small print and ask about fees and default procedures.
Risks and Disadvantages of Secured Loans
Secured loans can be helpful but carry material downsides:
Because these trade-offs are significant, secured borrowing should be considered alongside non-secured solutions such as a debt management plan or IVA, not as an automatic fix. See our comparison section below.
Is a Secured Loan Right for You?
Secured borrowing may be suitable in some scenarios but inappropriate in others.
Scenarios where it may help
When you should avoid it
If you are unsure, an impartial affordability check and comparison of alternatives is essential.
Secured Loans vs Unsecured Loans vs Debt Solutions
Secured vs Unsecured loans
Secured loans are backed by property, often allowing larger amounts and lower immediate rates but creating repossession risk. Unsecured loans carry no asset risk, but eligibility is tighter and rates are typically higher. Choose secured loans only if you understand the asset risk and long-term cost implications.
Secured loan vs Debt Management Plan (DMP)
A DMP is an informal arrangement to make one affordable monthly payment across unsecured creditors — no asset is at stake and there is no legal protection. A secured loan converts unsecured balances into a single secured obligation. DMPs can be safer if you cannot afford the structured secured repayment, but they may not be available or effective if creditors refuse concessions or balances are high.
Secured loan vs IVA
An IVA is a formal, legally binding insolvency solution involving an Insolvency Practitioner and possible debt write-off. An IVA provides legal protection from creditors and can be a better option if you need part-debt write-off and cannot sustain long-term secured repayments. Again, use professional advice to weigh the implications.
How to Get a Secured Loan Through Money Debt & Credit
We don’t push products — we help you compare them and decide.
Step-by-step process
What our service includes: impartial review, lender matching, negotiation support and clarity on fees and long-term costs. We work with FCA-authorised partners and stress that “we’ll help you explore options; you decide”, so all you need is to contact us.
If you prefer a non-secured route or formal insolvency, learn more about us, we’ll explain those too and introduce you to the right advisers.
FAQs About Secured Loans
Practical Comparison Table
| Feature | Secured/Homeowner Loan | Unsecured Consolidation Loan | Debt Management Plan (DMP) |
| Security | Yes — loan secured on property | No | No |
| Typical term | 3–35 years (varies) | 1–7 years | N/A — informal monthly plan |
| Repossession risk | Yes | No | No |
| Access with bad credit | Often possible (rates higher) | Harder | Possible via charities |
| Monthly payment | Lower (longer term) | Higher (shorter term) | Based on affordability |
| Total interest paid | Often higher if long term | Often lower if short term | Depends on creditors’ concessions |
Regulation and Safeguards
Secured lending and regulated debt advice operate within UK regulatory frameworks. The Financial Conduct Authority (FCA) expects firms that provide consumer credit and regulated debt advice to be authorised; use the FCA register to verify a firm’s status. Money Debt & Credit works with FCA-authorised partners and recommends that you check lender and adviser authorisation before proceeding. The FCA warns against unauthorised firms offering unsuitable debt advice — always verify credentials on the FCA Firm Checker.
Next Steps — Get Independent, Practical Advice
Secured loans can be a useful tool, but they are not a universal solution. Use them only after you understand LTV, term, fees, and the real risk to your home. If you’re considering this route, start with a free, confidential assessment so we can compare secured consolidation against other options like an IVA or a DMP.