Any time someone borrows money from a bank, the funds lent are referred to as a loan. Any time when the bank asks for collateral (a security that the bank takes charge of if you are unable to pay, like your home or property), that’s called a secure loan. A first secured loan on property is considered to be first charge, while a second loan (perhaps a home equity or second mortgage) is second charge. Secured loans are easier to obtain than an unsecured loan, as the bank has a means of repayment in the event that you are unable to.



There are many types of secured loan programs available, offering different benefits and such to the borrower. But no matter which one you choose, there are some things you need to know before you agree to or sign anything.

First, secured loans come in a variety of amounts (typically averaging between £3,000 to £50,000, but have been seen as high as £250,000 with some lenders). They are repaid on a monthly basis for a predetermined amount of time (usually between 3 and 25 years). Some loan programs may have a prepayment penalty (a fee attached to the loan if it is paid off earlier than expected), so be sure to ask your lender if this applies to your loan.

Second, the APR (Annual Percentage Rate) is the interest you’ll be charged for borrowing the money. Your APR will depend on several factors, including your credit history and equity available in the property. It’s a wise idea to compare interest rates from different lenders to be sure that you’re getting the best one possible.

Next, you need to know how to apply for a secured loan. The Internet revolution has changed the lending industry for the better, as it’s no longer necessary for you to leave your home to apply for a secure loan. Although you can visit your local branch of your favorite lending institution, it’s much easier to login online and enter your information, or to pick up the telephone.

Finally, you need to know how governing laws are protecting you. All secured homeowner loans are subject to the Consumer Credit Act of 1974. This act contains strict guidelines as to how money is lent out, covering loans up to £25,000. (Loans for greater amounts are unregulated). Before such a secured loan is granted, you will have to sign a legally binding credit agreement for the terms of your particular program. A consideration period of 7 days is to be granted to you by the lender. Lenders are to offer you insurance options to cover your monthly loan payments in the event that you are unable to pay under specific circumstances, such as illness, unemployment, an accident or death. All coverage options will vary between lenders, and so will the cost, so be sure to check with your lender for any details, specifically as to what is covered and what is not.