In this brief guide, we are going to discuss secured loans for poor credit.

If you have poor credit then you may be looking at secured loans as your best option of getting a mortgage and this may indeed be the case but speaking to a bad credit mortgage broker to fully analyse your situation and mortgage options could help.

What is a secured loan for poor credit?

A secured loan for poor credit is a secured loan for people who have poor credit.

Poor credit could include:

  • Missed credit repayments
  • Late credit repayments
  • A county court judgement
  • A debt management plan
  • An individual voluntary arrangement
  • A bankruptcy
  • A home repossession
  • A mortgage default

Secured loans for poor credit will usually offer lower loan to value rates and have higher mortgage rates.

In most cases, borrowers will begin to search for secured loans for poor credit after they have been turned down due to having poor credit.

If you are not sure if you have poor credit or what your credit score is then there are a few things you should do first so you are informed and know where you stand.

If you are unsure of what your credit score is then you should check your credit score from the four credit bureaus in the UK: Experian, Crediva, Equifax and Transunion.

Some of these credit bureaus may charge you a fee to view your credit report so what you can alternatively do is request a statutory credit report which is a free credit report which each credit bureau must provide to you upon you requesting it.

Alternatively, you can also use credit score services such as Checkmyfile and clearscore to check your credit report.

If you discover you have poor credit then you may be better off speaking with a bad credit mortgage broker who can assess your options and locate the best-secured loans for you.

You can get a secured loan for poor credit and borrow as much as £100,000 given the right circumstances.

A secured loan is paid over the same terms as mortgages and can be repaid over 25 to 30-year terms.

A secured loan is secured against your property so ensure you keep up on your monthly mortgage repayments if not you run the risk of having your home repossessed.

Due to the risk of your home being repossessed you may only want to consider a secured loan if you have been unable to get unsecured loans or a suitable remortgage.

Can you get a secured loan with poor credit?

Yes, you may be able to get aa secured loan with poor credit but this all depends on how long ago the poor credit was incurred, how much equity you have in your home and your recent credit behaviour since you incurred the poor credit.

Most secured loan lenders will prefer not to lend within 12 months of a bad credit activity being registered on your credit file.

You may be able to find some specialist secured loan lenders who will consider you within 12 months of a bad credit record on your credit file but they may have none competitive mortgage rates.

What sort of poor credit is acceptable to secured loan lenders?

There are many secured loan lenders in the market and they will accept a variety of poor credit issues which you have.

These could be:

  • Missed credit repayment
  • Late credit repayments
  • County court judgements
  • Bankruptcy
  • Home repossessions
  • No credit score

If you have never had any credit product in the past then it is possible that you may have no credit history.

If you have no credit history then the lender will not be able to asses your creditworthiness and will likely refuse you for credit.

Most bad credit lenders will assess your application if you have any of these issues above.

If you have multiple bad credit issues then a specialist bad credit lender may be able to help you.

What can you use poor credit secured loans for?

Secured loans may be suitable if you are in need of credit over a longer-term and you cannot find any better credit option. The good news is that secured loans tend to have better rates than payday loans or guarantor loans.

Secured loans can also be cheaper than some credit cards.

Poor credit loans should be seen as a last option as the mortgage rates are of course still much more expensive due to your poor credit score.

The other thing is that the secured loan is secured on your property which means that you can lose your home if you fail to meet your monthly repayments.

The repayment terms on a secured loan are around 25 to 30 years and this means the interest cost on the secured loan could be very extensive over the term of the secured loan.

Most borrowers may want to use a secured loan for any of the purposes below:

  • To consolidate debt (you should be aware that although your monthly repayments may be much smaller due to the fact that you borrow over a much longer time, the interest on the secured loan may end up costing much more than  your prior debts)
  • To fund a renovation
  • To release equity

How to find the best-secured loans for poor credit

To find the best-secured loans with poor credit you will need to search the mortgage market.

The secured loans market for poor credit is very niche and hence finding a secured loan may be difficult.

You may need to seek the help of a bad credit mortgage broker.

Is a secured loan the best option for you?

A secured loan may be suitable if you need to borrow a large amount of money and are happy to repay it over a longer-term.

If you have poor credit then a secured loan may be your best option as most lenders will not approve you for a personal loan with bad credit.

A personal loan will be a mich cheaper option than a secured loan.

Some pros of a secured loan

  • You will be able to borrow more than a secured loan
  • You can borrow over a much longer period
  • Secured loans may be seen as easier to get approved for

A secured loan may be viewed as being much more flexible due to the fact that your hoe is being used as security for the loan.

The secured lender’s risk is now much smaller and hence you are able to borrow more over a longer period of time.

How much does a bad credit secured loan cost?

The cost of a bad credit secured loan will depend heavily on the type of bad credit you have, the amount of equity you ave in your home, the lenders criteria and other personal circumstances.

Lenders in this space will usually review each application on a case by case basis.

Use a bad credit mortgage broker

You may want to consider using an independent bad credit mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide, we discussed secured loans for poor credit.

If you have any questions or comments please let us know

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.