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Simon Nicholson

Written by Simon Nicholson on October 4, 2019

Updated October 18, 2019

How to Compare Secured Loans

When it comes to choosing a secured loan to meet your needs, it can be confusing knowing where to start. With so many different lenders and loan options available, knowing what is going to best suit your circumstances can be a struggle.

The internet is packed full of comparison websites that are specifically designed to help you compare secured loans. While these websites are here to help, they can still be difficult to navigate, especially when they are full of financial jargon. This guide covers everything you need to know when it comes to comparing secured loans online and what to look out for when considering your options.

Choosing A Secured Loan Type

If you have already decided that you want a secured loan, then you will have already considered using your assets as collateral. All secured loans use something as security against the loan amount, and therefore will be putting something at risk if repayments are not kept up.

When it comes to secured loans, there are a few different types to choose from. In order to compare secured loans online, you will need to consider which type of secured loan you need:

  • Homeowner Loans: The most common type of secured loan is a homeowner loan. They are only available to property owners as they allow you to borrow money against the value of your home. They are repaid on a monthly basis, and if any repayments are missed, then your home could be at risk of being repossessed.

Homeowner loans are also commonly known as home equity loans or second charge mortgages.

  • Mortgages: A standard mortgage is always secured against the property you are purchasing, which makes them a type of secured loan. The value of these secured loans is often very high as you are likely to borrow anywhere up to 95% of the property value.
  • Debt Consolidation Loans: A debt consolidation loan is designed specifically for paying off other debts in order to have just one monthly repayment. Many debt consolidation loans must be secured against an asset, such as property, as it makes them less risky to lenders.
  • Bridging Loans: A bridging loan will be secured against a property and is used to bridge the gap between selling one home and purchasing another. These are often very short term secured loans, as they only need to be long enough to cover the time between two sales.
  • Vehicle Loans: A vehicle loan, such as a car or van loan, is secured against the vehicle that is being purchased. They work by borrowing enough money to purchase the car outright and then paying the lender back plus interest with monthly repayments. If the monthly payments are not kept up, then the lender can repossess the vehicle to settle the debt.

Knowing the type of secured loan you need will make comparing your options online much easier. Be careful to only compare products of the same type in order to get an accurate idea of your options.

Comparing Secured Loan Costs

No matter what type of secured loan you choose, it is vital that you compare interest rates and additional charges of any lenders you are considering. Every lender will offer a different interest rate, and on top of these, there may be other additional charges to think about. This secured loan calculator can help give you an estatimate of the loan costs.

All secured loans will charge interest of some kind, and all lenders will publish their representative interest rates online for you to compare. However, it is essential to remember that these published interest rates are just indications of the kind of rates you could pay, but the actual interest rates offered will depend on your circumstances.

It is also important that you understand whether the interest rates of a secured loan are fixed or variable as this can impact the amount you end up paying overall. A fixed interest rate may be higher initially but is guaranteed to stay the same throughout the entire loan duration. This means that your monthly repayments will be the same every single month and can make managing your finance and budgeting easier.

A variable interest rate is likely to be cheaper when you first take out your loan but can change throughout the loan term. This means that your monthly repayments could increase, and you could end up paying more over the duration.

In addition to interest rates, you will also need to compare any additional or hidden fees that may come with your secured loan. For example, these could be fees they take for either finding the loan or setting up the loan on your behalf from a loan broker. Some lenders could charge any of the following fees on a secured loan:

  • Origination fees
  • Underwriting fees
  • Administration fees
  • Credit report fees
  • Appraisal fees
  • Processing fees.

Some lenders may include these fees within your monthly repayments, and sometimes it is easy to miss them when you compare your options. Ask your potential lenders to give you a breakdown of all fees that would be involved with a secured loan should you choose them.

Consider Lender Credibility And Experience

One other aspect that is important to consider but often overlooked when it comes to comparing secured loans online is lender credibility. You might have found your ideal loan from a lender online, but before you go ahead and apply, you should be confident that they are trusted to handle your finances.

You need to look out for credible lenders that will not try to overcharge you or be dishonest about your borrowing needs. Do some research into any lenders you are considering for your secured loan. Ensure they are authorised by the Financial Conduct Authority as this is a sure sign that they operate fairly, and you will be protected should anything go wrong.

Look up some previous customer reviews for any lender you are considering. Use review sites such as Trustpilot to see what other borrowers have said about their services and products. This can often give you a good indication of whether a lender is credible and worth using.

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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 a loan or any other debt secured on it.

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