The rate on a secured loan, also called a homeowner loan or second charge mortgage, is decided by 5 things: your combined loan-to-value, your credit history, the amount, the term, and whether the rate is fixed or variable. Second charge rates typically sit above first charge mortgage rates and below unsecured loan rates, because the lender ranks behind your mortgage. Compare offers on the APRC, and see our monthly rate index at /rates/ for current ranges.
- Combined loan-to-value, meaning your mortgage plus the new loan against your property value, is the single biggest driver of rate.
- Lenders group applicants into credit tiers, and a recent default or CCJ usually moves you to a higher-priced tier.
- Fixed rates commonly run for two to five years, after which the loan reverts to the lender's variable rate.
- The APRC includes fees and any reversion rate, so it is the fairest way to compare two secured loan offers.
- A secured loan is secured on your home, which may be repossessed if you do not keep up the repayments.
What decides the rate a secured loan lender offers?
Secured loan pricing is tiered rather than personal. Each lender publishes a grid, and where you land on it depends on a handful of measurable factors.
- Combined loan-to-value (LTV). Add your mortgage balance to the new loan and divide by the property value. Lenders price in bands, commonly up to 65%, 75%, 85% and higher, and each step up the bands costs more. Our guide on maximum LTV explains the ceilings.
- Credit tier. Lenders sort applicants by the age, size and number of missed payments, defaults and CCJs on their file. A clean file sits in the top tier; adverse history within the last 12 to 24 months typically drops you one or two tiers.
- Loan amount. Larger loans often attract a slightly lower rate because the lender's fixed costs are spread over more interest, while very small loans can be priced higher.
- Term. Some lenders price longer terms a little higher; others do not distinguish. Term has a much bigger effect on the total repaid than on the rate.
- Fixed or variable. A fixed rate gives certainty for a set period and is sometimes priced slightly above the equivalent variable rate.
Income and employment type affect whether you qualify and how much you can borrow, but usually not the rate itself. Checking where you sit on these grids through a broker will not affect your credit score.
Why do second charge rates sit above mortgage rates but below unsecured loans?
It comes down to who is paid first. Your mortgage lender holds the first charge on your home, so if the property is ever sold or repossessed, they are repaid in full before the secured loan lender receives anything. The second charge lender carries more risk of a shortfall if prices fall, and prices that risk into the rate. Our guide on what a second charge means covers the mechanics.
An unsecured lender, by contrast, has no claim on any asset at all. If you stop paying a personal loan or credit card, the lender's only route is a court claim, so unsecured rates are higher again, and higher still for borrowers with adverse credit. That is the trade-off at the heart of consolidation: the secured loan is usually cheaper per pound borrowed because your home is the security, and your home may be repossessed if you do not keep up the payments.
The gap between the three markets moves with Bank of England base rate and with lenders' funding costs, so we do not quote live figures on this page. Our monthly rate index shows the ranges lenders are currently advertising across the main LTV and credit bands. For a like-for-like comparison of the two consolidation routes, see secured loan vs remortgage.
What is a reversion rate and why does it matter?
Most secured loans are sold with an initial fixed rate lasting two, three or five years. When the fixed period ends, the loan does not finish; it reverts to the lender's standard variable rate for the remainder of the term, which could be another 10 or 20 years. That reversion rate is usually set as a margin above Bank of England base rate or the lender's own managed rate, and it is commonly higher than the initial fixed rate.
This matters for two reasons. First, your monthly payment can rise at the end of the fixed period, so budget for the reversion figure, not just the introductory one. Second, because the reversion rate applies for most of the term, it dominates the total cost of the loan, which is why the APRC on a five-year fix can look surprisingly high compared with the headline rate.
Many borrowers avoid reversion altogether by refinancing when the fix ends, either onto a new secured loan or by folding the balance into a remortgage. Check the early repayment charge before relying on that plan; our guide on paying off a secured loan early explains what is typical. Some lenders fix for the full term, removing the reversion question at the cost of a higher initial rate.
How should I compare secured loan rates?
Use the APRC, the annual percentage rate of charge. Unlike the headline rate, the APRC folds in the lender's arrangement fee, the broker fee, any valuation and legal costs, and the assumption that you pay the reversion rate after the fixed period ends. Two loans with the same headline rate can have APRCs several points apart once fees are included. Our guide on what a secured loan APRC is goes deeper.
Then look at the total amount repayable over the term. The example below uses a fixed illustrative rate to show how the numbers fit together.
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.
| Line | Amount |
|---|---|
| Current monthly payments (£12,000 of cards at 24.9%, £8,000 loan at 12.9%) | £532/month |
| New secured loan payment (£20,000 at 7.9% over 15 years) | £190/month |
| Total repayable over the 15-year term | £34,196 |
The monthly figure falls sharply, but the total repaid is £14,196 more than the amount borrowed. If a rate looks attractive only because the term is long, it is the term doing the work, not the rate. If you are unsure whether borrowing against your home is the right answer, free and impartial advice from MoneyHelper, StepChange or Citizens Advice comes before any application.
Chasing the lowest secured loan rate is the wrong focus if the fees push the APRC well above the headline figure, or if the rate is only low because the term stretches the debt over 20 years or more. It is also not the right route if your existing mortgage deal has ended, since a remortgage at a first charge rate may cost less overall. And if the rates you are being offered are high because of recent adverse credit, waiting 12 months while you rebuild your file, with free debt advice in the meantime, can move you into a cheaper tier and save far more than any amount of shopping around today.
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
Are secured loan rates fixed or variable?
Both are available. Most lenders offer an initial fixed period of two to five years, after which the loan reverts to a variable rate for the rest of the term. Some offer variable rates from the outset, and a few fix the rate for the full term.
Why is my secured loan rate higher than my mortgage rate?
Because the secured loan lender holds a second charge and is repaid after your mortgage lender if the property is sold. That extra risk is priced into the rate. Second charge rates are still typically below unsecured personal loan and credit card rates for the same borrower.
Does a bigger deposit of equity get me a lower rate?
Yes, usually. Lenders price by combined loan-to-value, so the more equity left after the new loan, the lower the band and the rate. Borrowing slightly less to drop below a band boundary, such as 75%, can reduce the rate on the whole loan.
Can I get a lower rate by choosing a shorter term?
Sometimes, but the effect is small compared with what a shorter term does to the total cost. A shorter term means higher monthly payments and much less interest overall, so if you can afford it, the term is the lever to pull rather than the rate.
Where can I see current secured loan rates?
Our monthly rate index at /rates/ shows the ranges lenders are currently advertising by loan-to-value and credit band. The rate you are actually offered depends on your own circumstances, and a broker can give you an accurate figure without affecting your credit score.