A secured loan, also called a homeowner loan or second charge mortgage, is a good idea for paying off debt when it lowers your monthly outgoings to a sustainable level and you keep the term short. In the standard example, £20,000 of cards and loans costing £532 a month becomes £190 a month, but spread over 15 years the total repaid rises to £34,196. It is a poor idea if you would carry on borrowing.
- A secured loan uses your home as security, so it may be repossessed if you do not keep up the repayments.
- Rates are typically lower than credit cards and unsecured loans, because the lender has the property as security.
- Spreading debt over 10 to 20 years usually means paying more interest overall, even though the monthly figure falls.
- FLA data shows 44,725 new second charge agreements in the 12 months to June 2026, with debt consolidation at least 60% of new business.
- Free, impartial advice from MoneyHelper, StepChange or Citizens Advice is worth taking before you secure any debt on your home.
When is a secured loan a good idea for paying off debt?
The strongest case for a secured loan is when your unsecured debts are expensive, your monthly payments are stretching you, and you have a mortgage deal you want to keep. Expensive cards and personal loans can be replaced with a single secured loan at a lower rate, which cuts the interest you pay each month as well as the payment itself. Because the loan sits behind your existing mortgage rather than replacing it, your current rate and any fixed period are untouched.
It also tends to suit homeowners whose credit history has a few marks on it. Many secured loan lenders will consider defaults, missed payments or a CCJ, because the equity in the property reduces their risk. Our bad credit hub covers what lenders in this part of the market typically look for.
Finally, it works best when you treat consolidation as a one-off reset: clearing the cards and closing them, choosing a term that ends well before retirement, and overpaying when you can. FLA data shows 44,725 new second charge agreements were written in the 12 months to June 2026, with debt consolidation at least 60% of that lending, so this is a well established route, but the discipline afterwards is what makes it pay.
When is a secured loan a bad idea?
The clearest warning sign is that you would be securing debt on your home without changing the habits that created it. If the cards are likely to be run up again, you end up with the secured loan plus fresh unsecured debt, and a payment you may not be able to sustain. In that situation, consolidation makes things worse, not better.
It is also a bad idea if the monthly payment only looks affordable because the term is very long. A 20 or 25 year term can turn a modest debt into a large one once interest is added, and it may run past the point where your income falls. And if you are already behind on your mortgage or would struggle to cover both secured payments if your circumstances changed, adding a second charge puts your home at greater risk. Free debt advice from StepChange, MoneyHelper or Citizens Advice can help you weigh up alternatives such as a debt management plan before you commit.
Fees matter too. Broker, lender, valuation and legal fees on a small loan can wipe out a large part of the saving. If your debt is a few thousand pounds, a 0% balance transfer or simply overpaying may be cheaper. Our comparison of secured loans and personal loans sets out where each tends to win.
How much does a secured loan cost compared with keeping the debts?
The honest comparison is not the monthly payment on its own but what you repay over the whole term. Below is the standard worked example using fixed illustrative figures.
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 |
|---|---|---|
| Now: £12,000 on cards at 24.9% (minimum payments) plus an £8,000 personal loan at 12.9% over 5 years | £532 | Depends on how long the cards take to clear |
| New: £20,000 secured loan at 7.9% over 15 years | £190 | £34,196 |
The monthly payment falls by £342, which is the figure that draws people in. The total repaid of £34,196 is £14,196 more than the amount borrowed, because the debt is being repaid over 15 years rather than five. Whether that is a good trade depends on what the cards would have cost on minimum payments alone, which is often far more, and on whether a shorter term, say 8 or 10 years, is affordable for you. A qualified adviser will show you both figures side by side.
How do you keep a consolidation loan from costing more overall?
Three choices make most of the difference. The first is the term: pick the shortest one that leaves you with a comfortable buffer each month rather than the longest one available. The second is overpayments. Many secured loan lenders let you overpay by a set percentage each year without an early repayment charge, and putting even £50 a month extra towards the balance can cut years off the loan. Our guide to paying off a secured loan early explains how these allowances work.
The third is what happens to the cleared accounts. Reducing the limits or closing the cards removes the temptation, and lenders considering your application will often want to see that the debts being consolidated are actually repaid, sometimes by paying the creditors directly on completion.
Remember that the loan is secured on your home, and your home may be repossessed if you do not keep up the repayments. Checking your options with a broker will not affect your credit score, and a good adviser will compare a secured loan against a remortgage and tell you plainly if neither is right for you.
A secured loan is not the right answer if the debts are small enough to clear in a couple of years by overpaying, if you have little equity, or if you could not keep up two secured payments should your income dip. It is also the wrong move if you are already in arrears with your mortgage, or if the real problem is spending that a new loan would not fix. In those cases a free debt advice charity can help you look at a debt management plan, a payment arrangement with creditors or other options that do not put your home at risk.
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 it cheaper to consolidate debt with a secured loan?
Usually cheaper each month, but not always cheaper overall. Secured loan rates are typically lower than cards and personal loans, so interest per month falls. Spread over 10 to 20 years, though, the total interest can exceed what you would have paid by clearing the debts faster. Compare both figures before deciding.
Does a secured loan put my home at risk?
Yes. The loan is secured on your property, so if you do not keep up the repayments the lender can ultimately take possession, just as your mortgage lender could. That is the central trade-off: a lower rate in exchange for putting your home behind the debt.
Can I get a secured loan for debt consolidation with bad credit?
Often, yes. Many secured loan lenders consider homeowners with defaults, missed payments or a CCJ, because the equity in the property reduces their risk. The rate offered will usually be higher than for a clean credit file, and the maximum loan-to-value is commonly lower.
Should I choose a secured loan or a remortgage to pay off debt?
It depends mainly on your current mortgage deal. If you are on a good fixed rate with an early repayment charge, a secured loan leaves that deal untouched. If your deal is ending, a remortgage may offer a lower rate on the whole borrowing. A broker compares both.
What term should I choose for a debt consolidation secured loan?
The shortest term you can comfortably afford. A longer term lowers the monthly payment but increases the total interest, sometimes by thousands of pounds. Many people settle on 8 to 15 years and then use overpayments to clear the balance sooner when money allows.
Will checking secured loan options affect my credit score?
No. An initial enquiry through a broker uses a soft search, which is visible only to you. A hard search is only recorded when you go ahead with a full application to a specific lender, and even then a single application has only a small, short-lived effect.