Here at QuidMarket, we want to help you make informed decisions for your finances, and that involves providing information about all of the available options. On this page, we’ll go into detail about secured loans for bad credit, the difference between secured and unsecured loans, and useful information to know if you’re considering taking out secured loans in the UK. Our aim is to help you decide if a secured personal loan is the best fit for your current circumstances.
What Is A Secured Loan?
Secured loans are a type of cash loan that requires you to offer up something you own, known as collateral, to ‘secure’ the loan. There are many different types of secured loans in the UK, including mortgages and logbook loans. The amount of money that you can borrow with a secured personal loan will vary, especially if you are looking for secured loans for bad credit in the UK, but with secured personal loans it will usually be limited to around half the market value of your collateral.
The purpose of using collateral in secured loans is to offer the lender a ‘backup’; if you are unable to keep up with the repayments on a secured loan in the UK, the lender can repossess the asset and sell it to recoup the costs.
Normally, collateral that has been repossessed from a secured personal loan will be sold at auction (and at a much lower price than its real value) so that the lender can recover the lost value as quickly as possible. If your collateral were to sell for less than the outstanding balance of your loan, you would still be liable to pay the remainder.
When Are Secured Personal Loans Useful?
Secured loans are most commonly used for large-scale purchases when the value is so significant that security is necessary. These include mortgages and car finances, where the security is the property or car that you’re paying off. However, secured loans do not always need to be secured against what you are purchasing. You can use secured personal loans to borrow cash using any object of high value, including the likes of jewellery, although different lenders have different criteria for what they’ll accept as collateral.
Another common reason that people choose secured loans with these relatively lower loan amounts is because they have a poor credit rating. Many people with low credit scores believe that their only option is to take out secured loans for bad credit in the UK. While your options may be more limited with a low credit score, it is still possible to borrow the cash you need without risking your valuables.
If you find that you are able to borrow more with a secured loan than an unsecured one, you should consider which is the better option. Borrowing more cash than you can sustainably afford is not in your best interests. Should you be unable to keep up with the repayments, not only will it negatively affect your credit score (as with any other type of credit) but you risk losing the valuables that you have used to secure the loan.
What’s the Difference Between Secured and Unsecured Loans?
Borrowing amount: Secured loans are available for larger amounts than unsecured loans. While this is useful if you need to borrow a large amount, it can be tempting to ‘overborrow’ – which is simply borrowing more than you need. This will lead to repaying interest unnecessarily.
Interest charges: The interest charges may be lower on secured personal loans, which can make a big difference if the loan is of significant value. However, with smaller loan amounts or shorter loan terms, the amount you save might not be enough for you to justify risking your collateral.
Application speed: The application process for secured loans in the UK tends to take slightly longer, because you will need to have your collateral valued before the lender can agree to the loan amount and offer you any loan terms.
Default consequences: The biggest difference between secured and unsecured loans is what happens if you do not keep up with repayments. With both types, defaulting will negatively affect your credit score. However, defaulting on secured loans in the UK could leave you without a car or home, and so represents a much higher risk to you as a borrower.
Our Alternative to Secured Loans for Bad Credit in the UK
What is a secured loan good for if it could potentially leave you worse off than before? Here at QuidMarket, we don’t believe in asking our customers to risk their homes, cars or other prized possessions to borrow the cash they need in an emergency. We’re happy to offer loans for bad credit in line with responsible lending guidelines and without ever asking for security. Rather than asking our customers to take on the added risk of losing their assets, we simply only approve loans where we know it’s the right fit for your finances. It sounds simple, but it works.
We take the time to fully understand the financial situation of each and every applicant instead of offering secured personal loans. To do this, every application is manually checked by a fully trained member of our team. If we can see that you will sustainably be able to afford the repayments, we’ll usually be happy to approve your application, with no collateral or guarantor required.
Before applying for our non secured loans in the UK, use the handy loan calculator tool on our homepage to test different combinations of loan term with the amount you need to borrow. We offer loans from £300 to £600 (up to £1500 for returning customers), dependent on affordability, with flexible repayment terms from 3 to 6 months. You can see an example of the typical repayments with each loan term. Bear in mind that you will receive a tailored loan for your finances, and so the repayments may not be exactly what you see here.
You should also double check that you meet our eligibility criteria before applying. These are:
- Live in the UK
- Over 23 years old, and under 65 years old
- Have a mobile phone (we send an SMS code during your application)
- Hold a UK bank account with a valid debit card (we run a verification check that takes 1p)
- Be in employment and take home at least £1,300 a month.
If you have any questions about how QuidMarket’s services differ to secured loans, we’ll be more than happy to help. Simply contact us today.