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Consolidating debts with a Secured Loan

Published on:January 13, 2021Author:Emma Hartley

Consolidating your debt refers to paying off multiple debts with one larger loan so that you are just left with the one single debt. Secured loans tend to be used to borrow larger sums – above £10,000 to £15,000 but can be for lower sums.

Benefits and Risks

You need to be clear on the short and long term benefits plus the risks of converting unsecured debt into a debt that is secured against your property. It is utterly crucial to have a good understanding of your financial position so you can properly understand the benefits and risks.


  • As secured loans are lower risk for the lenders, the interest rates charged are much lower than loans which are unsecured.
  • The loans tend to stretch over longer periods than unsecured loans – 10 to 15 years which again can lower payments.
  • Protects your credit rating compared to a debt solution


  • The loan is secured against your house and if you fall into serious arrears, your house is at risk
  • If the interest is variable your payments could increase.

Applying for a Secured Loans

Secured loans are generally sourced through brokers who are regulated by The Financial Conduct Authority, “FCA”. The process generally starts with an online application or a discussion over the phone. The broker must ensure that you have sufficient equity in your property and you can afford the repayments.

Brokers have a variety of tools available to check your information including credit searches, online valuations and “open banking” (facility which allows you to share transactions through your bank account).

Lenders do not want to lend if your circumstances are precarious.

Consolidating with a secured loan only makes sense if:

  • The loan clears all of your debts.  
  • You must be able to afford the monthly repayments comfortably.
  • The loan repayments are lower than your current debts combined. 

If you do not meet all of these points you may need alternative debt help rather than a consolidation loan which could put you in a worse position.

Why might using equity in your property NOT be a sensible way to consolidate your debts?

Taking unaffordable or hard to juggle unsecured debts and voluntarily securing them to your property is potentially putting your home at risk. If you cannot keep up with the repayments you may lose your home.

Based on your current circumstances the repayments may be affordable however, we can all take from this past year that we do not know what is around the corner and if your circumstance do change and you are no longer able to afford that repayment the secured lender may start legal proceedings to take possession of your home.

Can The Debt Advisor advise on the merits of a secured loan?

Yes but we will also look at all your options. We will help you understand your financial position, go through a budget with you and explain all options to you including:-

  • Budgeting, possibly reducing outgoings to improve affordability
  • Consolidating debt via unsecured or secured loans
  • Informal payment plans such as Debt Management “DMP”
  • Formal payments plans such as Individual Voluntary Arrangements “IVA’s”

To discuss alternatives to debt consolidation you can speak to a member of our Advisory team who will be able to discuss all appropriate solutions with you.

If we do help you with a secured or unsecured loan, we may earn a commission.

Give us a call on 0800 085 1825 for more information.