UpMyStreet guides: secured loans and debt consolidation

Secured loans can help consolidate your debts and get your finances back on track. More and more people - six million of us, according to the Bank of England - feel they are struggling with their finances. Secured loans re-organise debts into a single monthly repayment.

However secured loans can be risky when borrowers don't consolidate their debt properly. According to uSwitch, 763,000 secured loans were issued for debt consolidation purposes in 2006. Worryingly, 64% of those secured loan custumers went on to spend an extra £2,300 on credit.

Credit Action, the consumer credit group, argues that secured loans need to be more responsibly administered by lenders - but borrowers can carefully research secured loans too. 

 
1. Secured loan risks

Secured loans are offset against your property, meaning that you could lose your home if you don't keep up repayments. This is unlike unsecured debt, such as credit cards and personal loans. Secured loans generally have a longer repayment period and are for a larger sum, therefore the decision to take out a secured loan should not be taken lightly.

2. Close off all other credit

Secured loans can be used for consolidating your debts into one payment. If this is the principle purpose of your loan, it's vital that you are able to cover and close all other forms of credit you currently have, from credit cards to personal loans. If you continue to use another source of credit, your debt will continue to grow rather than diminish.

 
3. Be careful what you borrow

Borrow as much as you need with secured loans and no more. One in five consumers surveyed admitted to taking out a bigger loan than needed. Borrowing more than you need increases the loan repayment period and the overall amount you'll pay back on your secured loan.

4. Shop around

Secured loans are available from banks, building societies and specialist secured loan providers. It's important to compare the secured loans market before making a choice. Compare different secured loans using an impartial comparison service. 

5. Compare secured loans 

Start your search for secured loans.