Secured debt consolidation loans

A secured debt consolidation loan can be an effective way to manage your ongoing debts and can even help you save money.

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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.

What is a secured debt consolidation loan?

A secured debt consolidation loan is any secured loan that is used to combine multiple existing debts under one loan. If you have outstanding loans, credit cards or other debts, it can often be difficult to manage and keep track of your ongoing repayments. By using a debt consolidation loan, you can merge your current debts and then only need to make repayments on the new loan.

Secured loans are a form of personal loan that use the equity you have in your home as security against the cost of the loan. This means that a secured loan represents less risk to the lender than a regular personal loan, so you’re more likely to be approved, and will also potentially get better rates and loan terms. If you fail to repay your loan, the lender can take ownership of your equity.

How does a secured debt consolidation loan work?

If you want to use a secured loan to consolidate debt, you’ll need to apply for a loan amount that covers the size of your existing debts. Once you’ve been approved for the loan, you can then use the funds to pay off all your existing debts. You then make repayments on the new loan until it has been paid off in full.

If possible, you should try to find a secured loan that offers a lower interest rate than your existing loans or debts, as this will help you save money on your repayments.

Pros and cons of secured debt consolidation loans


  • Competitive rates. One of the key benefits of debt consolidation is that it gives you the chance to reduce how much you pay in interest if your new loan has a lower rate than your existing loans. Secured loans generally come with much lower rates than unsecured loans or credit cards, making them more suitable as a way to consolidate debt.
  • More flexible loan terms. If you’re looking to get a debt consolidation loan, chances are you may be struggling with managing the repayments on your existing debts. With a secured loan you can generally get longer loan terms, often up to 30 years, which can reduce the size of your ongoing loan repayments and make it more manageable to pay off your debt. However, keep in mind that the longer the loan term, the more you will generally pay in interest on the loan. This means the overall cost of the loan will be higher.
  • Better chance of approval. A secured loan represents less risk to the lender than a regular unsecured loan, and this means you’re more likely to be approved than you would with other debt consolidation options. If you already have multiple debts, a lender may be unlikely to approve you for another unsecured loan or credit card, and a secured loan.


  • Requires home equity. Secured loans are only available to borrowers who own equity in their house or property, which is used as collateral against the cost of the loan. If you’re not a homeowner or don’t want to use your home equity as security, you’ll be unable to get a secured loan.
  • Your equity is at risk. In the event that you don’t repay your secured debt consolidation loan, the lender may take ownership of the home equity you used as security. In certain extreme cases, this may even mean you have to sell your house. If you’re already struggling with repaying debt, a secured loan may be a risky option.
  • Limited provider options. While most traditional lenders and banks offer unsecured personal loans and mortgages, many don’t offer secured loans. It is generally specialised lenders that will offer secured loans, which means you may be restricted in the number of loans you can use for debt consolidation.

Can I get a secured loan for debt consolidation if I have bad credit?

Yes, you can get a secured debt consolidation loan even if you have bad credit, and a secured loan may be the most suitable form of debt consolidation for those who have a poor credit history. As a secured loan is backed by the equity you have in your home, lenders see it as less of a risk than other types of loan, so you have a better chance of approval.

What are my other options?

If you don’t own equity in your home, or don’t want to use it as security against a loan, you still have a couple of options when it comes to debt consolidation:

  • Unsecured loan. With a regular personal loan, you don’t need to provide an asset or equity as security in order to be approved. However, you may be limited in how much you can borrow, and lenders may be less willing to approve your loan if you’re already struggling with existing debts.
  • Credit card. Depending on the size of your current debts, you may be able to use a credit card to consolidate your debt. A balance transfer credit card lets you transfer existing debts on to a new credit card, and often come with an initial interest-free period. This means you can move your existing debt across to a credit card and then have up to 24 months to repay the amount, without being charged interest. However, you’ll generally need good credit history to get a 0% balance transfer credit cards, which means they may not be available to those looking to consolidate debt.

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