FinanceTeam

What is a Secured Loan?

The term "secured loans" or "home loans" is used by lending companies to differentiate between loans that are secured against an asset and those that are not. In most cases the asset that is used is a property - normally a person's primary residence. There are less frequent cases where a second property can be used or other assets such as a boat or a business asset. The reason a company may decide to secure a loan against an asset is to reduce the impact of the borrower defaulting in the future. Without the security of the asset, either the loan may not be made available or the rate of interest charged could be much higher. Secured borrowing tends to be used for larger or longer term loans.

Are secured loans more complicated?

Because a asset is being used to secure the loan, the lender will want to make sure that the value of the asset is sufficient for the size of loan it is securing. That means the lender will make a series of checks to verify that you actually own the property, it's value is accurate and any other borrowing already secured against that property is properly verified. In order to do all of that, the lender (or loan broker) will carry out checks such as verifying ownership with the Land registry, commissioning a valuation of the property and contacting the mortgage company associated with the current mortgage to determine the amount outstanding. All of this can take some time, but for the borrower it not really any more complicated, it just means a slightly longer wait.