Secured loans with Bad Credit

Most of the posts we do on here regarding bad credit are to do with Mortgages. However I thought it would be useful to make a post on secured loans with bad credit and how they could be an option following a recent case we had on our desk.

The case we had…

In this situation, the secured loan route was not the cheapest, but it had other benefits.

The applicants had a mortgage with a high street lender, but it was only a small mortgage, for ease lets say £40k at a rate of 1.5%. They needed some additional money in order to complete a home renovation and extension, for this is we say they needed £60k but the rate was at 9.5%.

We sat down and worked out that this average out at around 6.3%.

Because the customer was unable to get a mortgage at “normal rates”, we had to look at the specialist lenders. The specialist lenders were around 0.3% cheaper than the average of the secured loan and existing mortgage.

However we would have also had to take into account the Early repayment charges if we switched lenders. In addition to that, there is also a risk by taking the customer away from the high street they could become a “mortgage prisoner” towards the end of the term. A mortgage prisoner is someone who is stuck with their current lender who is unable to switch to competitive products and is stuck on the SVR – this is more common with specialist lenders than on the high street. Typically if your adverse prevents you from getting back on the high street.

The customer opted for the remortgage in the end due to the price difference and will hope things pan out down the line.

The pros and cons of a secured loan

I think this case was a perfect example for this article. Usually with these enquiries the customer will have a larger mortgage percentage wise and need a smaller secured loan. That then typically puts the cost a little more in the secured loans side.

I think the reason this example was useful is it shows that we there are multiple things to consider in addition to the cost. Initially you might baulk at seeing a rate of 9.5%, but once averaged out, it may not look quite so bad compared to the alternatives.

We also need to consider whether or not you would need a specialist lender. Not all applicants with bad credit need to go away from the high street. What will happen at the end of the initial deal, will you have other lenders open to you or are you going to be stuck on the SVR?

Speed can also be a factor, especially if you have already applied for a mortgage and been declined and you have builders wanting to be paid. Secured loans are usually much quicker to arrange.


If you have bad credit and are looking to pull some money out of your home for home improvements, secured loans can be a good option. They are more expensive but potentially not excessively so and can be quicker and easier to arrange. They definitely have their place but may not be for everyone.

We can help you navigate the options and the costs. If this is something you would like to look into, please do get in touch.