Loans FAQ

What are secured loans?

Money advanced by lenders using customers' homes as security. If borrowers don't keep up payments, the secured loan providers know they can seize their customers' homes to meet their debts. This means that people's homes are genuinely at risk if they do not keep with repayments on their debts secured against them.

How much can people borrow?

The amount people can borrow will depend on how much equity (the difference between the market value and the outstanding mortgage) they have in their home. Some lenders will advance as much as 125% of the value of their home but the majority of them are for less than £50,000. Providers will also take into account their borrowers' income and personal circumstances, as they'll want to know that they can repay their loans.

What can I use them for?

Some homeowner loans will be advanced with conditions (e.g. for home improvements only) but others will leave you to do as you please with the money borrowed.

How much do they cost?

You will pay interest to the loan provider at an annual percentage rate (APR). There will usually be an arrangement fee and you may also have to pay to have your home revalued. Check if there is compulsory insurance and/or an early redemption charge if you want to repay early. Secured loans are generally cheaper than unsecured loans because lenders' risks are lower.

What is an APR?

The APR is a standard rate used by all authorised providers. It includes the interest you will repay and charges including arrangement fee and payment insurance. It does not include any early repayment fee.

Where can I get unbiased information on loans?

There is useful information on planning your personal finances at the government information service and the Financial Services Authority.

Are customers protected?

Under the Consumer Credit Act 1974, providers must give their customers up to seven days in which they can change their minds about proceeding with any loan of up to £25,000. There are no regulations to cover larger loans. Borrowers can also protect their loans with insurance and payment protection policies.

What happens if people fall behind with payments?

See the government information service for helpful advice.