A secured loan is one that is tied to your house - which means you might have to sell your home if you can't keep up with repayments. The advantages of secured loans over unsecured loans are that they offer lower interest rates, can be for larger amounts and have longer loan terms.

A secured loan can be for any purpose, such as debt consolidation, car purchase or home improvements. If you have a good mortgage deal, such as a fixed rate or discount that you want to keep, a secured loan can be a sensible alternative to remortgaging.

Lower interest rates

Secured loans are secured by the lender on your home, normally by a second charge on your property at the Land Registry. This security gives the lender confidence that you will repay the secured loan providing you have sufficient equity in your property. You should expect to pay a higher interest rate than your mortgage but a much lower interest rate than for unsecured loans, such as credit cards, bank overdrafts and other personal loans.

Larger loan amounts

A secured loan can be for £5,000 up to £100,000 but how much you can borrow depends on how much equity you have in your property.

Longer loan terms

A secured loan can be for a term of three years up to fifteen years. While you will pay more interest the longer the term, a longer term allows you to keep your monthly repayments down by spreading repayments over a longer time period.

Making comparisons

To get the best deal, shop around. In general, the more you borrow, the lower the interest rate will be, but rates vary from around 7% up to 20%.

You don't have to go to a traditional bank or building society, many good deals are offered through supermarkets, so shop around.

Be careful when comparing products as lenders calculate the annual percentage rate (APR) in different ways. Loans for specific items such as new cars are also available, often with lower interest rates.

When comparing APRs, make sure that you're comparing like with like. Don't pay attention to the monthly interest rates advertised by shops - these are always lower than the annual rate and can mislead you into thinking you've got a better deal than you really have.

Repayments

Loans are repaid in monthly instalments over an agreed period. This amount of time is usually fixed and if you want to pay off the loan earlier you might have to pay a penalty. The longer the repayment period, the more interest you will pay, so go for the shortest one you can manage.

Flexible loans, which let you pay back the money whenever you want, are becoming more common but the interest rate charged is often higher.

The most important thing is to make sure you know exactly what the monthly payments will be, and how much you will pay back in total.

Remember that if your bank or building society does turn down your loan application, it is obliged to explain the main reasons for doing so.