Secured debt consolidation loans
Find the right secured loan to consolidate your debts and stay on track with your finances.
Dealing with multiple debts can be overwhelming; secured debt consolidation loans offer a potential solution to simplify your financial situation.
Secured loans, also known as homeowner loans or second-charge mortgages, are a type of loan used to consolidate debt.
Pros include lowering your overall interest rates and flexible loan terms; cons include set-up fees, reducing the amount of equity in your home, and high risk if you miss any payments.
It may still be possible to get approved for a secured loan even if you have bad credit - however, this could come with higher interest rates/shorter terms than those offered by lenders who prefer borrowers with good credit ratings.
What is a debt consolidation loan?
A debt consolidation loan is designed to pay off your existing debts, such as credit cards, overdrafts and personal loans and consolidate them into one more manageable monthly payment.
By consolidating your debts into a single loan repayment, you can simplify your financial situation and lower the interest you pay on your borrowing.
Debt consolidation loans can be either secured (which means you use an asset such as your home to back it) or unsecured (not backed with collateral).
We provide only secured debt consolidation loans, which are taken out against the equity you have in your property. This provides security to the lender should you default on the loan.
A secured debt consolidation loan can effectively manage high-interest-bearing debts, handle your finances, and help you to work towards becoming debt free. It’s important to understand that if you fail to maintain payments on a mortgage or any other debt secured on it, your home may be repossessed.
How do secured debt consolidation loans work?
Secured debt consolidation loans combine your existing debts into a single loan secured against the equity in your home. These loans simplify your debt repayments and potentially reduce the interest you’ll pay.
Secured debt consolidation loans typically present reduced interest rates in comparison to unsecured personal loans. This is due to the security provided by collateral, such as your property. As a result, you represent a lower risk to the lender, as they have the means to recover their funds if you cannot meet the loan repayment terms.
When you apply for a secured debt consolidation loan with a lender, they will evaluate your financial situation, credit history, and property value to determine how much they are willing to lend to you - the loan amount is often a portion of your property’s equity.
If your application is approved, you’ll receive an offer outlining all the terms and conditions, which, once you agree to, you’ll receive the money to pay off your existing debts such as credit cards, overdrafts and any other outstanding personal loans you may have.
You’ll then start to repay a monthly amount to the lender. If you default on the loan, the lender has the legal right to repossess your home to recover their money.
How to get a secured debt consolidation loan
Obtaining a secured debt consolidation loan can be daunting, but our experienced advisers can simplify this process for you.
Once you provide them with the necessary information, they will identify the most suitable lenders and interest rates. They will also inform you of any fees or penalties and help to provide a stress-free application process.
You should assess your finances before applying for a secured debt consolidation loan. Gather information and be aware of your debts, income, and expenses to determine the amount you need to borrow.
The lender may require a formal valuation of your property to assess its value accurately. There may sometimes be a fee for this.
Pros and cons of consolidating debts with a secured loan
It can lower the interest rates on your existing debts by reducing multiple payments into one
Flexible loan term
It can potentially provide you with a more flexible loan term than a remortgage
Set up fees
There could be a set-up fee for the secured debt consolidation loan
You will reduce the amount of equity you have in your home
It puts you at risk of potentially losing your home if you were to miss any payments
Our expert says...
Secured debt consolidation loans can be a viable option to simplify your finances and reduce your interest costs. Our expert advisers can help you find the right debt consolidation loan for you.
However, before applying for a secured debt consolidation loan, you must ensure you can afford the monthly repayments, even if your circumstances change. You should also calculate whether or not you’ll be saving money when considering any fees associated with the loan.
Amanda Aumonier - Head of Mortgage Operations
Secured debt consolidation loan FAQs
When you first apply for a secured debt consolidation loan, there may be a temporary impact on your credit score because the lender will perform something called a hard credit check.
Hard credit checks leave a record on your credit report; having multiple hard credit checks performed within a short period of time can negatively impact your credit score because it appears to lenders that you’re in financial difficulty. A debt consolidation loan can positively impact your credit score if you manage it responsibly by consistently making payments on time.
Secured and unsecured debt consolidation loans can be used to help you handle your debts; which one is right for you will depend on your circumstances.
Secured loans are backed by collateral, most commonly the equity in your home. As with mortgages, your home may be repossessed if you do not keep up repayments on your secured loan.
Whether or not a secured consolidation loan is right for you will depend on your circumstances, how much you need to borrow, how much equity you have in your home and your credit score.
Unsecured loans don’t require collateral. Lenders assess your ability to borrow based solely on your creditworthiness and affordability.
You typically can’t borrow as much with these loans, and they often come with higher interest rates than secured loans.
The eligibility requirements for a secured debt consolidation loan will vary between different lenders, but all lenders will look at the following:
Your credit score and history - All lenders will look at your creditworthiness and how you’ve handled borrowing money in the past to determine whether they’re willing to lend to you.
Affordability - Lenders will look at your employment status, how much you earn and your existing outgoings to determine whether or not you’ll be able to afford your repayments.
Proof of homeownership and equity - You’ll need to provide evidence that you own your home. The amount you’re able to borrow with a secured debt consolidation loan will depend on how much equity you have in your home.
Age - You’ll need to be at least 18 to borrow money with a secured loan; some lenders also have an upper age limit for their products.
Yes, remortgaging and borrowing more on your mortgage to consolidate your debts is a reasonable alternative to getting a secured debt consolidation loan. However, whether it’s a better option for you will depend on your circumstances. You’ll need to consider whether you’ll be better off by remortgaging. If you’re unsure, it’s a good idea to speak to our experts, who can walk you through your options.
Remortgaging for debt consolidation during a fixed-rate mortgage term can mean you might have to pay early repayment charges. These charges could increase the overall cost of consolidating your debts.
In addition, obtaining favourable interest rates during remortgaging could be challenging if current interest rates are higher than when you initially secured your mortgage or you need to borrow a larger amount.
It’s important to remember that if you fail to maintain payments on a mortgage or any other debt secured on it, your home may be repossessed.
Minimum and maximum ages
Applicants must be over 18, with the maximum term finishing before they turn 80-85 depending on the lender
No minimum occupancy requirement with most lenders
There is no minimum income requirement with most lenders
Smaller property values
No minimum property value requirement with most lenders
What people are saying about Better.co.uk...
Important info & Marketing claims
Think carefully before securing other debts against your property. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.