How do secured loans work, and how are they different from unsecured loans?

A secured loan (sometimes called a homeowner loan or second charge mortgage) is borrowed against your home. Because the lender has your property as security, secured loans can run to larger amounts and longer terms than unsecured borrowing, and lenders are often more flexible about credit history. The trade-off is that your home may be repossessed if you fall behind.

An unsecured personal loan requires no collateral. Decisions are usually quicker and there is no property at risk, but the amount you can borrow and the length of the term are typically more limited, and your credit history carries more weight in the lender's decision.

Lenders generally do not restrict the purpose of a secured loan, as long as it is legal. Common uses include:

• Home improvements — extensions, loft conversions, kitchens and landscaping, spread over a longer term
• Debt consolidation — rolling credit cards and other loans into one payment (read our guide first: a lower monthly payment can still mean paying more overall)
• Major one-off costs — vehicles, weddings or family events
• Business purposes — working capital or equipment for sole traders and small businesses
• Tax bills — paying an HMRC liability to avoid penalties
• Education costs — school fees or tuition spread across the years you need to fund

The rate a lender offers depends on your circumstances: your income and outgoings, your credit history, and — for a secured loan — how much equity you have in your property. Lenders usually look at the combined loan to value, meaning your existing mortgage plus the new loan as a share of the property's value.

Rates can be fixed, giving payment certainty for a set period, or variable, moving with the Bank of England base rate or the lender's own variable rate. Fees can include a product or arrangement fee, a valuation fee and legal fees, and some may be added to the loan. The APR (or APRC on a secured loan) includes these costs, which is why it is the figure to compare between providers.

The term matters too. Spreading a loan over more years reduces the monthly payment but increases the total interest you pay — use the calculator below to see the difference.

A remortgage replaces your existing mortgage with a new, larger one. A secured loan sits behind your mortgage as a second charge, leaving your existing mortgage exactly as it is. A secured loan can make sense if remortgaging would mean losing a low fixed rate or paying early repayment charges; a remortgage can be cheaper if your current deal is ending anyway. Our guide on secured loans versus remortgaging walks through both.

Borrowing against your home turns an unsecured debt into one that can cost you your property. Before you apply, check that the repayments are affordable if your income falls or rates rise, whether there are early repayment charges, and what the total amount repayable will be — not just the monthly payment.

If you are struggling with existing debts, free and impartial help is available from MoneyHelper (moneyhelper.org.uk) and debt charities before you take on new borrowing.