8 Common Mistakes with Secured Loans & How to Avoid Them
Learn 8 common mistakes to avoid when taking out a secured loan – like borrowing more than you need or not having a repayment plan.
Related articles
Avoid These Costly Secured Loan Mistakes
Secured loans can be a smart way to borrow if you're a homeowner—but only if you go in prepared. Because your home is used as security, it's important to avoid some of the common mistakes. For more context, see our secured loans guide before you commit.
Here are 5 secured loan mistakes it's all too easy to make - and how to steer clear of them:
1. Not checking the total cost of the loan
It's easy to focus on the monthly repayments - but that doesn't tell the full story. Always check the total amount repayable, including interest and any fees. Look at the APR or APRC, and any fees and charges for the full picture. A lower monthly cost over a long term might mean you pay thousands more in the end. Our secured loans overview explains how rates and costs add up over time.
2. Borrowing more than you actually need
Just because you can borrow more doesn't mean you should. Borrowing extra might feel helpful short-term, but you'll pay interest on every penny. Only take what you truly need to keep repayments affordable and the cost of your interest down.
3. Ignoring early repayment charges (ERCs)
Some secured loans charge a fee if you repay early or make overpayments. If you're planning to clear your loan early - or even think you might - it's important to check the small print and factor in those costs.
4. Not comparing lenders or deals
Going with the first offer you see can cost you. Always compare multiple lenders, looking not just at interest rates but also fees, terms, flexibility, and customer reviews. For a bigger picture, our main secured loans page shows the different types available.
5. Overlooking the risks to your home
This is the big one. A secured loan is tied to your property, which means missing payments could lead to repossession. You’ll find more advice in our secured loan essentials guide. It's vital to borrow responsibly, know what you can afford, and get help quickly if you ever run into difficulties. Most lenders would rather work with you before opting for repossession as a last resort.
6. Not planning for interest rate changes
If your loan has a variable or tracker rate, your monthly payments could rise if interest rates go up. Many borrowers forget to plan for this, leading to payment shock later. Make sure your budget can handle rate increases - especially over a long loan term.
7. Using a secured loan to cover everyday spending
Secured loans are designed for larger, long-term borrowing - using one to cover short-term or everyday expenses (like holidays, shopping, or bills) can be risky and expensive, especially since your home is on the line.
8. Not considering future life changes
A secured loan is a long-term commitment, lasting up to 25 years or more. Major life changes like losing your job, getting ill, or having children can affect your ability to repay. Before borrowing, think realistically about how stable your income is and how you'd cope if things changed. If you’re still unsure, our secured loans overview is a good place to weigh up the pros and cons.
Frequently Asked Questions: Secured Loans
Can I still get a secured loan with poor credit?
Yes, you often can. Secured loans are based partly on your home's value and equity, so lenders may be more flexible - even if your credit history isn't perfect. Just expect to pay a higher interest rate, and always check terms carefully.
How much can I borrow with a secured loan?
UK secured loans range from around £10,000 up to £500,000 or more, but the amount you can borrow depends on factors like your property's market value, how much equity you have, and your income and outgoings. Lenders will assess how much you can comfortably afford to repay before approving your loan.
Will I lose my home if I miss repayments?
If you fall seriously behind on repayments and don't work out a solution with your lender, it's possible they could repossess your home. But this is usually a last resort. Most lenders will try to help first, so it's important to speak up early if you're struggling.
How long does the secured loan process take?
The process usually takes 1 to 3 weeks, depending on how complex your situation is and how quickly you can provide documents. Some lenders offer quicker decisions if your case is straightforward and your paperwork is ready.
Do I have to remortgage to get a secured loan?
No, a secured loan is separate from your existing mortgage. It's often called a second-charge loan, meaning it doesn't affect your current mortgage deal - you just make a separate monthly repayment alongside it.
Articles that might interest you
Secured Loans from Selina Finance
Borrow from £10,000 to £500,000 over 5-30 years. See how their flexible loans let you borrow as needed against home equity.
Top 10 Benefits of Secured Loans – Why Choose a Secured Loan?
Secured loans offer lower interest rates, higher borrowing limits, and longer repayment terms. Uncover the top 10 benefits of choosing a secured loan.
Secured Loans from Equifinance
Learn about Equifinance’s homeowner loans. Understand their product features and requirements for borrowers.
