UK Secured Personal Loans

Whether you wish to make home improvements, consolidate pre-existing debts or replace an old car, a personal loan can be the ideal solution. Personal loans can be either unsecured or secured (with some collateral such as property to reduce the risk for the lender). Although secured personal loans are generally cheaper, you could find your home repossessed if you default on the loan. In this article we examine:

  • How secured personal loans work
  • How much you can borrow with a secured personal loan
  • Getting a UK personal loan with bad credit

How do secured personal loans work?

Before applying for a personal loan, it’s important that you check the lender’s eligibility criteria. Before approving your application lenders will take into account your personal and financial circumstances such as:

  • Your age
  • Your income
  • Your credit record
  • Your pre-existing debts
  • Your financial history

Applications for secured personal loans can be made online, by phone or in-branch and secured personal loans may be use an asset such as property or a new vehicle as collateral for the loan. If your application is approved, a lump sum is paid directly into your current account and you sign an agreement which allows the lender access to the security you have offered. Repayments for a personal loan are usually set up by Direct Debit. Fixed monthly payments make it easier for you to budget although always check that interest is fixed rather than variable. Apart from the interest charges, you should allow for the loan’s arrangement fees and any penalties for early repayment.

How much can I borrow with a personal loan?

The amount that you can borrow depends primarily on your personal circumstances and how much you can afford to repay. Lenders are more likely to lend larger sums for secured personal loans.

A couple are standing in front of the newly purchased car with the help of a personal loan

The sum they will lend varies from lender to lender, but a secured personal loan is usually £1,000-£50,000 with a loan term of 1-7 years. However, the longer the loan term, the more you’ll pay overall in interest charges.

Can I get a personal loan if I have bad credit?

It is possible to get a personal loan if you have a poor credit score. However, as your past history shows you’re at greater risk of defaulting, you’ll find that you’ll be quoted a much higher interest rate than the lender’s advertised APR. If you find that you don’t fit the eligibility criteria for mainstream lenders or are turned down, there are brokers who specialise in finding loans for people with bad credit.

Is a personal loan considered income?

The only time that you need to declare a personal loan to HMRC is if it’s required for a business. Otherwise, the unsecured or secured personal loans don’t have to be declared as income, nor is the interest tax-deductible.

You need to declare a personal loan to HMRC if it's required for a business

How many personal loans can you have at once?

There are no rules about how many personal loans you can have at the same time. The main concern of lenders is that you can afford to make the repayments considering your personal and financial circumstances.

If you have a personal loan and need to borrow more, most High Street lenders give you two options. You can take out another loan (subject to passing an affordability check) and pay it off separately. Alternatively, you can refinance your existing loan by borrowing more and changing your monthly repayments and/or loan term. Whichever option you choose, most mainstream lenders stipulate that you must be a bank customer and that your pre-existing loan is with them.

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