A personal loan is usually better for debts under the typical £25,000 unsecured cap that you can clear within five years; a secured loan is usually better for larger sums, longer terms or imperfect credit. A personal loan needs a fairly clean credit file for its best rates and never puts your home at risk. A secured loan, also called a homeowner loan or second charge mortgage, can run to £100,000 or more over up to 25 years at a usually lower rate, but your home may be repossessed if you do not keep up the payments.
- Unsecured personal loans are commonly capped at around £25,000, with the keenest rates reserved for clean credit.
- Secured loans commonly range from £10,000 to £500,000, subject to equity and affordability.
- Secured loan rates are usually lower than unsecured rates for the same borrower, because the lender holds a charge on the home.
- A personal loan never puts your home at risk; a secured loan does if payments are not kept up.
- Specialist secured lenders consider defaults, CCJs and past arrangements that unsecured lenders usually decline.
- Checking your options will not affect your credit score.
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| Secured loan | Personal loan | |
|---|---|---|
| Rate level | Usually lower for the same borrower, tiered by credit and loan to value | Usually higher; the best rates go to strong credit files and mid sized loans |
| Fees | Lender arrangement fee, valuation, broker fee, small legal charge, often added to the loan | Often none, or a modest arrangement fee |
| Term | Commonly 3 to 25 years | Commonly 1 to 7 years |
| Secured on your home? | Yes, as a second charge behind your mortgage | No |
| Effect on existing mortgage | None, but your mortgage lender is asked for consent | None |
| Credit file | Adverse credit widely considered by specialist lenders | Adverse credit usually means decline or a much higher rate |
| Speed | Typically 2 to 4 weeks | Often same day to a few days |
| Amount available | Commonly £10,000 to £500,000 | Commonly £1,000 to £25,000; some lenders go to £50,000 |
| Best when | You need more than £25,000, a longer term, or your credit is imperfect | The debt is modest, your credit is good and you can clear it within five years |
| Worst when | The sum is small enough to clear unsecured in a few years | The payment over a short term is unaffordable, or you are declined |
What is the difference between a secured loan and a personal loan?
A personal loan is unsecured. The lender advances money on the strength of your income and credit history alone, and if you stop paying it can chase you through the courts, but it has no direct claim on your home. Because the lender carries more risk, it charges a higher rate, lends smaller amounts, and is more selective about who it lends to. Most high street and online personal loans top out at around £25,000, with a handful of lenders stretching to £50,000 for strong applicants, over terms of one to seven years.
A secured loan, also called a homeowner loan or second charge mortgage, is backed by a legal charge on your property, registered at the Land Registry behind your mortgage. That security lets the lender offer a lower rate, a larger sum and a longer term, and lets specialist lenders consider credit histories that an unsecured lender would decline. The cost of that flexibility is the security itself: if you do not keep up the payments, the lender can ultimately apply to repossess your home.
The two products are used for the same job. FLA data shows 44,725 new second charge agreements in the 12 months to June 2026, with loan consolidation making up at least 60% of them, and debt consolidation is one of the most common stated purposes for personal loans too. The question is not which is better in the abstract, but which fits the size of the debt, the state of your credit file and how long you want to take to repay. Our guide to what a homeowner loan is covers the secured side in more depth.
What does £20,000 cost on each type of loan?
The example below consolidates the same debts, credit cards of £12,000 and an existing personal loan of £8,000, with either a new unsecured personal loan over five years or a secured loan over fifteen. It also shows the secured loan over five years, so you can see how much of the difference is the rate and how much is the term. It uses the fixed illustrative rates used across this site.
Illustrative rates: The rates in this example are fictional and used only to show how the numbers work. They are not an offer. Your actual rate may be lower or higher and will depend on your circumstances, your property and the lender. Consolidating debt over a longer term can mean you pay more interest overall, even if your monthly payment falls.
| Position | Monthly | Total repayable |
|---|---|---|
| Current payments: cards £12,000 at 24.9% (minimum payments) and personal loan £8,000 at 12.9% over 5 years | £532 | Depends on how long the cards take to clear |
| New personal loan: £20,000 at 12.9% over 5 years | £454 | £27,242 |
| Secured loan: £20,000 at 7.9% over 5 years | £405 | £24,274 |
| Secured loan: £20,000 at 7.9% over 15 years | £190 | £34,196 |
Like for like over five years, the secured loan is £49 a month and about £2,968 cheaper in total, before its fees, which can be several hundred pounds to a few thousand and narrow that gap. Stretch the secured loan to fifteen years and the monthly payment falls to £190, but the total rises to £34,196, almost £7,000 more than the personal loan. That is the real trade off: a personal loan forces you to clear the debt quickly and expensively each month; a secured loan lets you choose, and the longer you choose, the more you pay overall. Our debt consolidation calculator runs your own figures.
Where is the cut-over point between the two?
Four thresholds decide it in practice.
- Amount. Below about £25,000, a personal loan is available in principle and worth pricing first. Above it, unsecured options thin out fast and a secured loan or remortgage becomes the practical route. Our £25,000 secured loan page sits right at the boundary.
- Credit file. Unsecured lenders price sharply by score. With a default, a CCJ or recent missed payments, the personal loan rate on offer, if any, often rises above a secured loan rate, and at that point the security is buying you a cheaper deal rather than a worse one. See secured loans with bad credit.
- Term and affordability. If the payment on a five year unsecured loan does not fit your budget, a secured loan over ten or fifteen years may. Lenders assess affordability on the new payment with the consolidated debts removed, as our guide on how much you can borrow explains.
- Equity. A secured loan needs enough equity for the combined loan to value to fit the lender's limit, commonly 75% to 85% of the property value. Without it, the personal loan is the only one of the two on the table.
A useful rule of thumb: if a personal loan is available to you at a rate you can afford over five years, take it, because it is the route that does not involve your home. If it is not, a secured loan is the next thing to price, not a fallback to be embarrassed about.
When does a personal loan win?
A personal loan wins when the debt is modest, your credit file is in reasonable shape and you can afford to clear the balance within a few years. In that situation it is faster, often fee free, and it keeps your home entirely out of the arrangement. Many are agreed within a day or two and paid out shortly after, against the two to four weeks a secured loan typically takes.
It also wins on discipline. A five year term with a fixed payment forces the debt down quickly, and there is no temptation to spread £15,000 over twenty years because the monthly figure looks comfortable. And it wins if you expect to move or remortgage soon, because there is no second charge to clear or to explain to a new mortgage lender. Our guide on whether a secured loan affects remortgaging later covers that side.
The limit is what you can be offered. A personal loan at a high rate is not a bargain because it is unsecured, and being declined by one or two lenders is a signal to price the alternatives rather than keep applying and adding searches to your file.
When does a secured loan win?
A secured loan wins when the amount is above the unsecured ceiling, when your credit history rules you out of a sensible personal loan rate, or when the payment only works over a longer term. It also wins when you are on a good fixed rate mortgage and do not want to remortgage, because it leaves the mortgage untouched; our secured loan vs remortgage comparison covers that decision.
Two features make it more flexible than its reputation suggests. Most secured loans allow overpayments, so a fifteen year term can be a safety net rather than a life sentence if you clear it early, though check the early repayment terms first. And the fees, valuation and legal costs are usually added to the loan rather than paid up front, which helps cash flow but adds to the total repaid.
The thing that never changes is the security. A secured loan is a commitment on your home, and it should only be taken on a payment you can meet in a bad month as well as a good one. If the honest answer is that the debts are unaffordable on any terms, a personal loan will be declined and a secured loan will be dangerous; free, impartial advice from MoneyHelper, StepChange or Citizens Advice is the right first call.
What improves your chances
- Add up the debts you want to clear; under about £25,000 with clean credit, price a personal loan first.
- Check your credit reports before applying anywhere, because unsecured lenders price sharply by score.
- Work out what monthly payment you can afford in a bad month, then see which product fits it over a term you are comfortable with.
- Compare the total repayable over each term, not just the monthly figure, and include secured loan fees.
- Ask a qualified adviser to show both routes side by side; an FCA authorised broker can price unsecured and secured options for you.
Alternatives worth considering
If the debt is mostly credit cards under about £10,000 and your credit is good, a 0% balance transfer card is often cheaper than either loan, provided you can clear it in the promotional period; see balance transfer vs consolidation loan. If your mortgage deal is ending, a remortgage may beat a secured loan for larger sums; our remortgage to pay off debt hub explains when. And if the debts are not affordable in full, a debt management plan through a free charity is worth understanding before any loan; see consolidation vs a debt management plan.
Worried about debt? Get free advice first
If you're struggling, it's worth speaking to a free, impartial debt advice service before you borrow more. They don't sell anything and won't judge your situation.
- MoneyHelper: Free, impartial debt advice backed by government
- StepChange: The UK's largest free debt charity
- Citizens Advice: Free, confidential advice on debt and money
Checking your options with Equiclear will not affect your credit score.
Frequently asked questions
Is a secured loan cheaper than a personal loan?
Usually, per pound borrowed, because the lender holds a charge on your home and can price for lower risk. Over the same term a secured loan normally costs less; over a much longer term it can cost more in total, even at a lower rate, and its fees narrow the gap.
What is the maximum personal loan I can get?
Most UK lenders cap unsecured personal loans at around £25,000, and a few offer up to £50,000 to applicants with strong income and clean credit. Above that, borrowing is normally secured, through a second charge loan or a remortgage. Secured loans commonly run to £500,000.
Can I get a personal loan with bad credit?
Sometimes, but usually at a much higher rate and for a smaller amount, and many mainstream lenders will decline. Specialist secured lenders are set up for adverse credit, which is why homeowners with defaults or a CCJ often find a secured loan is the cheaper of the two.
Does a secured loan put my home at risk?
Yes. It is registered as a second charge on your property, and if you do not keep up the payments the lender can add charges, report arrears and ultimately apply to the court for possession. A personal loan carries no such claim, which is its main advantage.
Which is faster to arrange?
A personal loan. Many are agreed online within a day and paid out within a few days. A secured loan involves a valuation, consent from your mortgage lender and a legal charge, and typically completes in two to four weeks. See how long a secured loan takes.
Can I pay a secured loan off early?
Usually yes. Most secured loans allow overpayments and early settlement, sometimes with an early repayment charge in the first few years, so check the terms before you sign. Our guide on paying off a secured loan early explains what to look for.
Does checking my options affect my credit score?
No. Checking your options will not affect your credit score. Equiclear does not search your credit file, and any check the broker makes at this stage is a soft search, which other lenders cannot see. A full application to a lender later on, secured or unsecured, is recorded on your credit file in the normal way.