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A secured personal loan offers the most benefits to the consumer. This type of loan is popular with homeowner’s. The interest rates on re-payments are lower than for an unsecured loan. The borrower provides an asset (for example, property or savings account) to guarantee (secure) repayment of the loan. This security gives the lender the confidence to offer more flexible terms, allowing a longer repayment term and/or larger sum to be borrowed. This type of loan incurs less of a financial risk for the lender and borrower alike.

When seeking for secured loans it is even possible for consumers who have a bad credit rating to secure a low interest rate. This is due to the lender’s confidence. Should repayments not be met the lender will seize the secured asset to pay off the debt. The loan may even lead to the repair of a bad credit score, providing repayments are consistently met.

Another benefit may be available if the sum to be borrowed is less than the equity in the secured asset. In this case the lender may consider a reduction of the advertised interest rate. The responsibility lies with the consumer to negotiate the rate within the conditions of the loan.

In the UK a secured loan typically allows borrowing of between £5,000 and £75,000 over a term of 5 to 25 years. The maximum sum borrowed will be limited by the credit history and repayment potential of the consumer. Due to their lower interest rates than unsecured loans, these are more popular.