Secured loans with bad credit

You should be able to get a secured loan even if you have a bad credit rating. Find out how they work and compare costs.

Table: sorted by overall cost for comparison (representative APRC)
Name Product Maximum LTV Loan amounts Loan terms Overall cost for comparison Repayments
Equifinance Adverse Secured Loan
60%
£5,000 to £150,000
3 to 25 years
10.2% APRC
£532.79
(£57,540.91 overall)
Norton Standard Secured Loan
75%
£3,000 to £55,000
1 to 25 years
14.8% APRC
£585.45
(£63,228.57 overall)
Evolution Unlimited LTV BTL Secured Loan
95%
£25,001 to £35,000
5 to 15 years
18.9% APRC
Not available for requested amount/term
Evolution Adverse Secured Loan
90%
£20,000 to £30,000
1 to 15 years
21.4% APRC
Not available for requested amount/term
Evolution Unlimited LTV Secured Loan
500%
£3,000 to £5,500
1 to 5 years
55.1% APRC
Not available for requested amount/term
United Trust Bank Ltd Secured Loan
65%
£10,000 to £125,000
3 to 30 years
7.1% APRC
£475.14
(£51,315.57 overall)
United Trust Bank Ltd Secured Loan
70%
£10,000 to £125,000
3 to 30 years
7.1% APRC
£475.14
(£51,315.57 overall)
United Trust Bank Ltd Secured Loan
65%
£10,000 to £125,000
3 to 30 years
7.4% APRC
£479.06
(£51,738.99 overall)
United Trust Bank Ltd Secured Loan
65%
£10,000 to £125,000
3 to 30 years
7.5% APRC
£481.03
(£51,951.48 overall)
United Trust Bank Ltd Secured Loan
70%
£10,000 to £125,000
3 to 30 years
7.5% APRC
£481.03
(£51,951.48 overall)
United Trust Bank Ltd Secured Loan
65%
£10,000 to £125,000
3 to 30 years
7.6% APRC
£483
(£52,164.45 overall)
United Trust Bank Ltd Secured Loan
70%
£10,000 to £125,000
3 to 30 years
7.6% APRC
£483
(£52,164.45 overall)
United Trust Bank Ltd Secured Loan
70%
£10,000 to £125,000
3 to 30 years
7.8% APRC
£485.97
(£52,484.9 overall)
United Trust Bank Ltd Secured Loan
65%
£125,001 to £500,000
3 to 30 years
8% APRC
Not available for requested amount/term
United Trust Bank Ltd Secured Loan
65%
£125,001 to £500,000
3 to 30 years
8.1% APRC
Not available for requested amount/term
United Trust Bank Ltd Secured Loan
65%
£125,001 to £500,000
3 to 30 years
8.2% APRC
Not available for requested amount/term
United Trust Bank Ltd Secured Loan
70%
£125,001 to £500,000
3 to 30 years
8.2% APRC
Not available for requested amount/term
United Trust Bank Ltd Secured Loan
75%
£10,000 to £125,000
3 to 30 years
8.2% APRC
£493.94
(£53,345.02 overall)
United Trust Bank Ltd Secured Loan
70%
£125,001 to £500,000
3 to 30 years
8.3% APRC
Not available for requested amount/term
United Trust Bank Ltd Secured Loan
75%
£10,000 to £125,000
3 to 30 years
8.3% APRC
£495.94
(£53,561.33 overall)
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Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.
Overall representative example
If you borrowed £34,000 over a 15-year term at 8.26% p.a. (variable), you would make 180 monthly payments of £370.70 and pay £66,726.00 overall, which includes interest of £28,531.00, a broker fee of £3,400.00 and a lender fee of £795.00. The overall cost for comparison is 10.8% APRC representative.

If you’re looking to borrow money but worried that your credit rating may get in the way, a secured loan could be your best option. By using your house as collateral against the loan, you’re more likely to be approved, even if you have bad credit.

If you don’t own a home, you may want to consider a bad credit personal loan.

What is a bad credit secured loan?

A secured loan lets you use your home as collateral against the cost of the loan. Also known as a “homeowner loan” or “second charge mortgage”, in the event that you fail to repay your loan, the lender can take ownership of the equity you have in your home.

A secured loan will also generally offer a more competitive rate than an unsecured loan, as there’s less risk to the lender that it can lose its money.

Much like in the unsecured loans market, a number of lenders have carved out a niche for themselves by focusing on secured loans for people with poor credit.

Are secured loans easier to get?

Putting up security can help borrowers with adverse credit to access a wider selection of loans. As well as making it easier to get approved, applying with the back-up of the equity in a home can help applicants to access larger sums and/or lower rates.

Because lenders have the reassurance that they’re less likely to lose their money, your credit rating becomes a less crucial factor in the approval process. What’s still crucial, however, is that you can comfortably afford the monthly repayments.

Will lenders want to check my credit file?

Yes, almost certainly. However many secured loan companies will put less of a focus on your credit score – with some even touting secured loans with “no credit scoring”. In reality this means that the lender will base its decision (at least in part) on your credit history. For example, when it looks at your history of payments in the last 12 months, if you’ve missed one payment that might be fine, but if you’ve missed two you might be declined.

Most lenders can use a “soft search” (a credit check that doesn’t impact your credit score or leave a footprint visible to other lenders) to give you a good idea as to whether or not it’s worth applying.

As with many other types of loan, secured loan interest rates are more often than not tailored to the individual applicant’s circumstances. In other words, if your credit file has taken a few bumps along the road, you might be offered a slightly higher rate than the lender’s marketed rates. Once again, a soft-search eligibility checker can also give you a clearer idea of the rate you might be offered.

While lenders promote their advertised “representative APRC”, it’s worth bearing this in mind that this is the maximum rate that 51% of customers will receive – the other 49% could be given a higher rate. Lenders must tell you your personalised APRC before you sign any agreement with them.

Pros and cons of a secured loan for bad credit

Pros

  • More likely to be approved. If you have bad credit, you may find it hard to be approved for an unsecured loan. By using an asset as collateral, you reduce the level of risk and improve your chances of getting a loan.
  • More competitive rate. A secured loan will likely have a much lower rate than an unsecured loan, especially for someone with bad credit.
  • Better loan terms. Compared with an unsecured personal loan, you can generally get longer loan periods and higher maximum loan amounts.

Cons

  • Higher risk. If you fail to repay your secured loan, you may lose the equity you have in your house, or even lose the house itself. You’ll also likely make your credit score even worse.
  • Must have equity in your house. Secured loans require you to have an asset to use as security, and this is almost always your house. If you don’t have equity in your house, you generally won’t be able to apply for a secured loan.
  • Loan size may be limited. The loan amount will be limited to the amount of equity you have in your house. If you only have a small amount of equity, it’s unlikely you’ll be able to get a large loan.

Am I eligible for a secured loan?

As with any loan, there are a number of eligibility criteria you will need to meet in order to be considered for a loan. Criteria vary from lender to lender, but as an absolute minimum you’ll need to be:

  • At least 18 years old
  • A UK resident
  • A homeowner with a mortgage

What are my other options with bad credit?

If you don’t qualify for a secured loan or don’t want to use the equity in your house, you still have a couple of other options:

It may be just as easy and cost-effective to remortgage – this will depend on how competitive a mortgage you’re on now vs how competitive a mortgage you could get. For example, if your credit score has deteriorated since you arranged your current mortgage, and you’re on a fantastic low rate, then you may prefer to get a new second-charge mortgage for a smaller amount rather than switching your whole mortgage to a new, less-competitive deal. By contrast, if you’re on your bank’s “standard variable rate”, then you might be able to borrow more at the same time as securing a better rate across all your borrowing.

Alternatively, you may be able to get an unsecured loan for bad credit. Without offering the lender security, the maximum amount you can borrow will be much lower – perhaps around £10,000-£15,000, and the interest rate is likely to be higher – perhaps around 15%-25%

Another option is a guarantor loan. By using a friend or family member (who has good credit) as a guarantor on your loan, you’ll be able to reduce the risk you represent to the lender, which means you are more likely to be approved for a loan. Guarantor loans typically only go up to £10,000, however, and can come with interest rates over 30% despite the fact that you’re giving the lender the reassurance of a guarantor with good credit.

One way to improve your credit score while borrowing is by using a credit-building credit card. If you can show a credit provider that you can responsibly manage your credit account, you’ll be able to improve your credit and make yourself more likely to be approved for a loan. However, these cards typically come with low initial credit limits – typically below £5,000.

Finally, if you can wait six months or more, then it may be worthwhile to focus on improving your credit score first and checking the market again to see if you’re eligible for better deals. Services such as LOQBOX offer a free way to boost your credit score while you save.

Can I use another asset as security?

In theory yes, you may be able to use another form of collateral with certain secured loans. However, many lenders (including those we’ve compared in this guide) will only consider customers looking to use the equity in their house as security.

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

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