Secured Loans Explained

Understanding how your secured loan works is the first step to taking control of your finances. This guide explains what a secured loan is and exactly what happens if you fall behind on your payments.

We’ll outline the practical steps you can take to protect your property, how to negotiate with your lender, and where to get free, expert advice to find a clear way forward.

What is a secured loan?

A secured loan is money you borrow using an asset like your house as a guarantee. This means that if you fall behind on payments, the lender can legally repossess your property or secured asset to get their money back.

Borrowing money against an asset to pay off debts can be extremely risky and is not an ideal way to pay off your debts.

What happens if I fall into arrears?

Arrears mean you’ve missed payments on your loan. If this happens, your lender is allowed to start the process of repossessing your property. It’s vital that you stay in touch with them. Ignoring letters won’t make the problem go away and could lead to court action.

How can my lender help me if I fall behind?

Lenders have ways to support you if you’re struggling. This is known as lender forbearance. They might agree to temporarily change the terms of your loan to make things easier.

Here is what you should do:

Contact your lender as soon as possible
Explain your situation clearly and honestly
Provide details about your household income and spending
Ask if they’ll negotiate a new payment plan

Can I stop my house from being repossessed?

Yes, you might be able to delay or stop the repossession process. If you receive a notice saying your house will be repossessed, you must get advice straight away. Try to speak with your mortgage provider before the issue goes to court. If your lender refuses to agree to a repayment plan, we can step in to help you.

What happens if my house is repossessed?

If repossession goes ahead, your lender will sell the property to recover the money you owe. Once the house is sold, they’ll take what is owed to them plus any costs for solicitors and estate agents. After this, they’ll pay any other lenders who have loans secured on the property.

What is a mortgage shortfall?

Sometimes the money from selling the house doesn’t cover everything you owe. This remaining debt is called a mortgage shortfall. You may still be legally responsible for paying this leftover amount. You can read our mortgage shortfall guide for more information.

What to do if you’re struggling with your secured loan

If you’re finding it difficult to pay a secured loan or other debts, get free, confidential advice online or call 0800 316 1833 to speak to one of our experts. Our experienced advisors are here to offer free, impartial support without judgement.