What Are Secured Loans Used For?


Slowly but surely, private and business borrowers alike are waking to the realities of secured lending. More specifically, the potential benefits of applying for a secured loan, over and above a traditional unsecured loan.

As the name suggests, the term ‘secured’ applies to any loan wherein the applicant’s assets are used as collateral. Where secured borrowing is an option, it can have several distinct advantages over unsecured borrowing. For example, secured loans are almost always offered with significantly lower rates of interest and more competitive borrowing costs. This is because secured lending is considered low-risk – the likelihood of the lender ending up out of pocket is minimal.

In addition, secured loans can also provide access to significant sums of money within a matter of days. A relevant option being a bridging loan, which can potentially be arranged, agreed and paid out in as little as 48 hours. But what are the most common uses for secured loans in the UK right now?  Under what circumstances would it be worth considering a secured loan application?

For the most part, any outgoing for which you may consider an unsecured loan is grounds for considering a secured loan. More importantly, any major expense that may be difficult to cover with an unsecured loan may be better suited to a secured loan. Typical uses for secured loans vary among personal borrowers and business borrowers, though there are common patterns with both.

Secured Loans for Personal Use

More often than not, taking out a secured loan for personal use means securing the loan against your home. In which case, the most common uses of all for secure loans are as follows:

  • Paying for home improvements and alterations
  • Consolidating existing debts with bad credit secured loans
  • Raising money to pay a deposit on a second property
  • Renovating or refurbishing a property prior to sale
  • Paying unexpected tax bills
  • Raising money for weddings, holidays and special events
  • Funding entrepreneurial ventures
  • Helping family members get on the property ladder
  • Generally covering unexpected financial shortfalls

Of course, the important thing to remember when applying for a secured loan for personal use is that you are putting your property on the line. In the unlikely event that you are unable to fulfil your repayment obligations, the lender may take possession of your property. If you encounter or anticipate any issues whatsoever after taking out the loan, it’s your responsibility to speak to your lender as quickly as possible. Rather than taking immediate action against you, it’s more likely they’ll be happy to discuss a mutually amicable resolution.

Secured Loans for Business Purposes

It’s commonplace for small and large businesses in the UK to apply for secured loans for a variety of purposes. Options tend to be broader for businesses in strong financial positions and with plentiful assets available – typical uses for secured loans including the following:

  • Raising funds for business expansion projects
  • Important renovations and building improvements
  • Paying for essential equipment and supplies
  • Covering unexpected outgoings and tax bills
  • Paying staff in the event of temporary financial gaps
  • Capitalising on profitable investment opportunities
  • Covering initial setup costs as a new business

Again, it is important to remember that the assets used to secure the loan may be at risk in the event of non-repayment. For business borrowers, secured loan options vary from commercial mortgages to bridging loans to development finance and many more besides. It’s therefore worth speaking to an independent broker or financial adviser, before deciding which secured lending option works best for your business.