What Are Secured Loans?

A secured loan is a form of borrowing where a property you own is used as security for the debt. The lender holds a legal charge against the property, meaning that if repayments are not maintained, the lender can pursue the property to recover what is owed. In exchange for this security, lenders typically offer lower interest rates and larger loan amounts than would be available on an unsecured basis, and over longer terms. For homeowners with equity in a property, a secured loan is often the most cost-effective way to borrow a substantial sum.

In formal and regulatory documentation, secured loans are referred to as second charge mortgages. The two terms describe the same product. Understanding what “second charge” means helps explain both how the product works and why it carries the risks it does. This guide covers the fundamentals: how secured loans are structured, when they make sense, what they cost, who they suit, and what borrowers need to be aware of before applying. Think carefully before securing any debt against your home. All figures are illustrative only.

What Is a Secured Loan?

A secured loan is a loan where repayment is backed by a legal charge on a property. The charge is registered at HM Land Registry, giving the lender a formal interest in the property that persists until the loan is repaid in full. If the borrower defaults, the lender can ultimately apply for repossession and sale of the property to recover the outstanding balance. This legal security is what allows lenders to offer lower rates than unsecured products, larger loan amounts, and longer repayment terms.

Most secured loans in the consumer market are second charge mortgages: they sit behind an existing first charge mortgage rather than replacing it. The “second charge” describes where this lender ranks in the queue for repayment if the property is ever sold following a default. The first charge lender (typically the mortgage provider) is repaid first; the second charge lender receives whatever remains. This additional risk is why second charge mortgage rates are higher than first charge mortgage rates, even though both are secured on the same property. The second charge mortgage guide covers the legal charge structure and what it means in practice in more detail.

How a Secured Loan Works

When a secured loan is taken out, the lender carries out a property valuation to establish its current market value, assesses the borrower’s income and affordability, and reviews the credit history. The combined loan-to-value ratio, the total of the existing mortgage plus the new loan as a percentage of the property value, is the primary measure of security. Mainstream lenders generally cap combined LTV at 80% to 85%, meaning the combined debt must not exceed that share of what the property is worth. Some specialist lenders will go higher, in some cases to 95% or above, but the rate rises sharply with the LTV band.

Most first charge mortgage deeds require the existing lender’s consent before a further charge is registered behind theirs, usually given through a deed or letter of postponement that records the order of priority. This is routine in most cases, but it is a real step in the process and one of the more common causes of delay, particularly where the first lender is slow to respond. Practice varies on timing: some second charge lenders will release funds before consent is returned, while others require it before they will issue an offer. Once the loan is approved and consent is in place, a second charge is registered at HM Land Registry, the funds are released, and repayments begin. The existing mortgage continues on its current terms; the secured loan sits alongside it, not in place of it. Two separate monthly repayments run concurrently: one to the mortgage lender, one to the secured loan lender. When the loan is fully repaid, the second charge is removed from the property title. For a step-by-step walkthrough of the application process, the how to apply guide covers each stage. For an explanation of how the LTV position works, the LTV ratios guide goes into detail.

What Secured Loans Are Used For

Secured loans are typically used when a borrower needs to raise a significant sum, more than an unsecured personal loan would provide or at a lower rate, and has sufficient equity in a property to support the borrowing. The following are the most common purposes in the UK market.

It is worth keeping the scale of this market in perspective. Second charge lending is a specialist route rather than a mainstream one, and the figures below give a sense of where it sits.

Sources: FCA, Second charge mortgages – improving outcomes for consumers (March 2026); Finance & Leasing Association new business figures to June 2026. Market figures are updated periodically and may have moved since publication.

What Secured Loans Cost

The cost of a secured loan depends on three main variables: the loan amount, the interest rate, and the term. The rate offered depends on the combined loan-to-value ratio, the borrower’s credit profile, and the lender’s own risk appetite. Loans commonly run from £10,000 to £500,000, with some lenders going higher by referral, though the typical loan written in this market is considerably smaller — brokers have reported averages in the region of £40,000 to £50,000.

How the rate varies by LTV band

Combined LTV is the single biggest influence on the rate. The bands below reflect indicative market pricing as at mid-2026. They are a guide to the shape of the market, not a quote — an individual case can sit outside either edge once a lender has reviewed the full picture.

Indicative bands drawn from published second charge lender and broker pricing as at mid-2026. Rates move with the market and with individual circumstances. Use a soft-search eligibility check to establish your likely position without affecting your credit file.

The term has a significant effect on both the monthly payment and the total interest paid. A shorter term means higher monthly payments but less total interest; a longer term reduces the monthly burden but increases the total cost substantially. The tool below illustrates how these trade-offs play out across different loan amounts and rates. Figures are illustrative.

Beyond the headline rate, secured loans carry additional costs. Arrangement fees are typically 1% to 2% of the loan and can often be added to the balance, in which case they attract interest across the full term. Valuation fees cover the lender’s assessment of the property. Broker fees apply where a broker is used and are frequently the largest single fee on a second charge — industry reporting has put the majority above £2,000, which is a substantial percentage of a smaller loan. Legal costs vary: many second charge lenders do not require the borrower to instruct their own solicitor, which removes a cost that applies on a remortgage, though independent legal advice is needed in some circumstances. Together these costs typically add 4% to 6% of the loan amount.

Because fees vary so much between products, the headline rate on its own is not a reliable basis for comparing offers. The figure to compare is the total amount repayable across the full term with every fee included. A lower rate carrying a large arrangement fee can cost more overall than a slightly higher rate with no fee, particularly on a smaller loan where a flat fee represents a bigger proportion of the balance. The secured loan fees guide covers every fee type in detail, and the APR guide explains how rates are calculated and what they do and do not include.

How the Loan Is Structured

Two structural choices affect what a secured loan costs and how much flexibility it gives you, and both are worth settling before comparing quotes.

The first is fixed or variable rate. A fixed rate locks the interest rate for an agreed period, so the monthly repayment stays the same regardless of what happens to the Bank of England base rate. This gives certainty over the cost and makes budgeting straightforward. The trade-off is that fixed rates are typically set slightly higher than the equivalent variable rate at the same point in time, and fixed products more commonly carry early repayment charges. A variable rate usually starts lower but moves with the base rate, meaning the repayment can rise as well as fall during the term. If rates rise, the repayment increases and the total cost will be higher than originally projected. The choice comes down to how much you value certainty over flexibility, and how comfortably you could absorb an increase if rates moved against you. The fixed vs variable rate comparator models both scenarios side by side.

The second is capital repayment or interest only. Most secured loans are capital repayment, where each monthly payment reduces the balance so the loan clears by the end of the term. Interest-only second charges are available from some lenders, typically at lower maximum LTVs and with a credible repayment strategy required for the capital. The monthly payment is significantly lower, but the balance does not reduce and must be repaid in full at the end of the term. Some lenders exclude debt consolidation from interest-only products altogether. The figures in this guide assume capital repayment throughout.

Regulation and Eligibility

Second charge mortgages secured on a borrower’s own home moved into the FCA’s mortgage regime on 21 March 2016, when the EU Mortgage Credit Directive was implemented in UK law. This means lenders and brokers offering or arranging them must be FCA-authorised and must follow the responsible lending rules that apply across the mortgage market. These include a full affordability assessment based on verified income and actual expenditure, the provision of a standardised European Standardised Information Sheet (ESIS) before a binding offer is made, a reflection period, and regulated conduct if the borrower encounters financial difficulty. Loans taken out before that date sit on different footing: certain Consumer Credit Act 1974 protections were retained for them, including the statutory right to settle early and to a rebate on early settlement.

The reflection period is often misunderstood. When the lender issues its binding offer, it must give the borrower at least seven days during which that offer stays open and cannot be withdrawn or rewritten, other than in defined circumstances such as a material change in the borrower’s situation. It is a period in which to compare offers and consider the decision, not a compulsory wait: the borrower can accept at any point within it and proceed straight to completion. There is no separate right to withdraw from the contract once it has been entered into, though the loan can be repaid early in accordance with its terms.

Eligibility is assessed across several dimensions simultaneously. Lenders look at the equity in the property (the combined LTV position), the borrower’s income and affordability, their credit history, and the property type and condition. Age is also a factor: most lenders require the loan to be repaid before the borrower reaches 75 or 80, which can constrain the maximum term available to older applicants. Unlike unsecured lending, where only the borrower’s creditworthiness matters, the property’s value and saleability are part of the assessment because the lender’s security depends on being able to realise that value if repayment fails. The eligibility criteria guide explains in detail what lenders assess and what the thresholds look like in practice across each dimension.

What the FCA found in 2026

In March 2026 the FCA published the findings of a review into advice, fees and affordability assessments across second charge lenders and intermediaries. It found examples of good practice, but also identified several weaknesses: advice that steered customers towards debt consolidation without clear evidence that it was appropriate for them, affordability assessments that appeared to overlook key living expenses, weak information flows between intermediaries and lenders, incomplete record keeping, and intermediary fees that were high relative to first charge mortgages and difficult for consumers to compare or assess for value. The FCA has said it is considering further policy changes to support better outcomes for customers consolidating debt.

None of this makes the product unsuitable, and the regulatory protections described above still apply. It does mean a borrower should treat the process as something to scrutinise rather than simply pass through. Three practical implications: ask what the broker fee is, in pounds, before proceeding, and how it compares to what the same broker would charge on a first charge mortgage; check that the affordability assessment reflects what you actually spend rather than a generic estimate; and if the loan is for debt consolidation, ask specifically why this route is better for you than the alternatives, and expect a substantive answer.

How the Process Works

From first enquiry to funds received, a straightforward second charge typically takes three to six weeks. Cases using an automated valuation with complete documentation move faster, sometimes within two to three weeks; non-standard properties, complex income, slow first-lender consent or solicitor delays push towards the upper end. The stages below run in parallel rather than in sequence, so the overall timeline is set by whichever track takes longest. The guide on how long a secured loan takes covers what affects each stage.

Who Secured Loans Suit — and Who They Do Not

A secured loan is not the right product for every borrower or every purpose. It tends to suit borrowers who need a larger sum than unsecured lending will provide, who have sufficient equity to support the borrowing, and who can demonstrate affordability across the full repayment schedule. It may also suit borrowers who have struggled to qualify for unsecured products because of an impaired credit history, where the equity position gives a specialist lender enough security to consider the application.

It is generally less suitable for borrowers who need a small sum for a short period, who have very limited equity, whose income would be stretched by the repayment, or who are not confident they can maintain repayments for the full term. The property risk applies regardless of what the money is used for, so borrowing secured against a home for something that will not help repay it — a holiday, a wedding, a one-off event — means taking on a secured obligation with nothing on the other side of it. The article on whether secured loans are a good idea works through this decision in more depth.

Risks and Benefits

Secured loans offer genuine advantages over unsecured borrowing for the right borrower in the right situation. They also carry risks that are materially more serious than those associated with unsecured credit. Both sides of this picture need to be understood before any application is considered.

The most important risk is repossession, and it deserves clear framing. A secured loan uses the borrower’s home as security. This is not a formality; it is the legal mechanism that makes the product work. If repayments are not maintained, the lender has the right to pursue the property. FCA regulation requires lenders to consider forbearance before taking enforcement action, but this does not eliminate the risk; it adds process. If you are struggling, or think you might, contact the lender early rather than waiting — and free, impartial debt advice is available from StepChange, Citizens Advice and MoneyHelper at no cost. The risks of secured loans guide and the what happens if you cannot repay guide cover the default and enforcement process in detail.

Secured Loans vs the Alternatives

A secured loan is not the right product in every situation where a borrower wants to raise money. Several alternatives are worth considering, each with different cost and risk characteristics.

A remortgage replaces the existing mortgage with a larger one, releasing equity as cash. It typically achieves a lower blended rate than a secured loan because the additional borrowing is at first charge rates, but breaking an existing mortgage deal may trigger a substantial early repayment charge, and the timing relative to the existing deal’s end date matters significantly. The secured loan vs remortgage guide covers this comparison in detail, including a calculator for comparing total costs.

An unsecured personal loan involves no property security and therefore no repossession risk. For amounts up to around £25,000 and borrowers with good credit, an unsecured loan may be competitive in rate terms and avoids putting the property at risk. For larger amounts or borrowers with impaired credit, the secured route typically offers materially lower rates and greater availability. The table below sets out the main differences, and the secured vs unsecured loans guide covers the decision framework in full.

Tools to Help You Plan

The following tools cover the main calculations and checks involved in assessing a secured loan. Each is designed for the preparation stage, before any formal application is submitted.

Frequently Asked Questions

How much can I borrow with a secured loan?

The maximum available is determined by two independent constraints: the equity in the property (the combined LTV limit) and the affordability assessment (whether income is sufficient to service the repayments). Mainstream lenders generally cap combined LTV at 80% to 85%, with a small number of specialists going higher. On a property worth £320,000 with a mortgage of £200,000, the maximum combined borrowing at 80% LTV would be £256,000, meaning up to £56,000 could be borrowed on a secured loan alongside the existing mortgage. The actual offer may be lower if the affordability assessment produces a smaller figure.

Borrowing at the top of the LTV range is expensive, so the maximum is rarely the right target. The most competitive rates sit below 70% combined LTV, and the gap between that band and the 75% to 85% band is substantial. The LTV and equity calculator shows the equity position and maximum borrowing for a specific property value and mortgage balance. The eligibility checker provides a broader assessment including income and credit profile factors.

Can I get a secured loan with bad credit?

Yes, in many cases. Because the loan is secured against property, lenders can accept borrowers with adverse credit histories, including missed payments, defaults, CCJs, and in some cases discharged bankruptcy, where an unsecured lender would decline. The security of the property reduces the lender’s exposure, which is what allows this broader acceptance. Some specialist lenders manually underwrite rather than credit score, and routinely disregard satisfied CCJs and defaults, and smaller unsatisfied ones. The trade-off is that adverse credit typically results in a higher rate and a more restricted choice of lenders. The severity, recency, and whether adverse markers are satisfied or outstanding all affect what is available and at what rate.

For borrowers with adverse credit, using a soft-search eligibility check before submitting a formal application is particularly important: it gives an indication of likely acceptance and rate without leaving a hard search on the credit file. Multiple formal applications that are then declined add negative markers and compound the difficulty. The secured loans for bad credit guide covers the adverse credit landscape and the lender market in detail.

Can I repay a secured loan early?

In most cases yes, either in full or through overpayments, but what it costs depends on the product. Many fixed-rate products carry an early repayment charge calculated on the outstanding balance and the remaining term, which can be substantial in the early years of a longer loan. Under the FCA’s mortgage rules an early repayment charge must be a reasonable pre-estimate of the cost to the lender rather than a penalty, and the maximum amount payable has to be set out in the offer document — so the figure should never come as a surprise at settlement. Some fixed products allow limited overpayments, commonly up to 10% of the balance a year, without triggering the charge. Variable-rate products are more likely to permit unlimited overpayments and early settlement without penalty, though this is not universal.

Second charge loans taken out before 21 March 2016 sit under different rules: certain Consumer Credit Act 1974 protections were retained for that back book, including a statutory right to settle early and to a rebate. If your loan predates the 2016 change, check which basis applies before assuming the charge quoted is correct.

Whether repaying early makes financial sense depends on the size of any early repayment charge relative to the interest that settling would save. On longer-term fixed-rate loans with significant balances outstanding, the charge can outweigh the saving, making early settlement less advantageous than it first appears. The early repayment charge calculator models this for a specific loan, and it is worth running before committing to a fixed-rate product where there is any prospect of settling early.

This article is for informational purposes only and does not constitute financial advice. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it. All rates and figures cited are illustrative and were correct at the time of writing. Actual outcomes depend on your individual circumstances, the lender, and the specific product. Always seek independent financial advice before making significant borrowing decisions.