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Secured loans sometimes have a rough reputation, which is occasionally well-deserved (but we’ll get on to that later). Horror stories including sky-high APRs, and the threat of repossession strike fear into the hearts of many would-be borrowers, not to mention those dodgy daytime TV ads!

However, in certain circumstances they can be extremely useful and viable solutions; and because these 2 different positions genuinely co-exist despite the apparent contradiction, here’s a brief report for anyone considering what to do about their credit arrangements, to help you to understand some of the main pro’s & cons of secured loans.

The Pros…

Secured loans are available to most customers with a property on which it may be secured, so for homeowners who have been unfortunate enough to have racked up some adverse credit history, a secured loan can be a real help.

Secured loans are available for higher amounts. Unlike unsecured loans, which are usually limited to amounts under £25,000, a secured loan can be for almost any amount, secured loans specialist The Loan Helper for example can arrange loans for up to £500,000.

Secured loans are flexible. You can arrange your secured loan repayments over a period which suits you best, usually anywhere between 3 and 25 years.

Secured loans are a real alternative to a remortgage. If you’re considering remortgaging to free up some equity for other uses, you should consider a secured loan as an alternative. depending on the terms of your current mortgage, proprty equity, credit profile etc, a secured loan may be a more affordable option.

The Cons…

Secured loans have a reputation for charging very high APRs. However, this reputation is not necessarily justified – many secured loans are highly competetive compared with many mid-market unsecured loans. But there are of course loans available from lenders who are prepared to take on the ‘riskiest’ clients, with numerous CCJs, defaults and mortgage arrears, even bankruptcies and IVAs are no barrier to borrowing from such specialist lenders, however as you might imagine, such borrowers have much higher delinquency rates than the norm, and at the riskiest end of this market where minimal equity exists for security lenders often charge in excess of 20% APR to cover the risks involved. Again, being a specialist in this area The Loan Helper can source a secured loan for even the most extreme financial circumstances a homeowner may find themselves in.

If you’re thinking about a secured loan, make sure you do your research thoroughly and that the APR you sign for is reasonable and affordable for your circumstances. Fortunately, you can rely on your friends at The Loan Helper, where you’ll receive specialist and expert guidance and help to choose a suitable deal from the hundreds of loans to which they have access from 16 of the UK’s best lenders.

The Myths…

Your home is at risk with a secured loan, but not with an unsecured loan. Whilst it is very true that if you fail to repay your secured loan your lender can use the charge on your home to force a sale and recover their money, any creditor can apply to the court and obtain a charge on your property if the loan becomes delinquent, and once the lender has that charge your debt to them is now secured against your property, so there is little real difference other than one additional process to obtain the charge.

The ‘quick-solution’ consolidation loan. Secured loans often tend to act as magnets for borrowers with pre-existing debt problems, who see a secured loan as an instant fix to all debt problems. Whilst a secured loan can be used as a viable and valuable tool to reorganise the finances of over-committed borrowers, it is not an instant fix in itself. Once you’ve taken out a consolidation loan, you’re still in debt and whilst the consolidation of other debts will likely have reduced your overall outgoings, you must ensure that you do not then take on further credit and build back up your outgoings once more. For example, if your consolidation loan has paid off your credit card or overdraft facility, DON’T then start building up your credit card balance or overdraft all over again! Otherwise there has been no point in the consolidation, which was done in the first place to reduce your outgoings, not to give you an opportunity to get even deeper into debt.

If you have any uncertainty over your resolve post-consolidation, then terminate your credit card agreement and overdraft facility lest you succumb to the temptation of using them and continuing the spiral into unmanageable debt.

Consumer Minister Ian McCartney has urged borrowers to take advantage of free debt advice services before resorting to dealing with loan sharks.

The Minister, who will open a new London office for the Money Advice Trust (MAT), which runs National Debtline, said many people did not realise that free, impartial support was at hand to help them avoid debt problems.

“My advice to people struggling with debt is to pick up the phone - there are people who can help you find a solution and avoid the sharks.”

Mr McCartney, who recently visited Illegal Money Lending Teams cracking down on loan sharks in Birmingham and Glasgow, said:

“Loan sharks are lowlifes whose primary purpose is to rip you off. Many of them will resort to intimidation and violence to take money off the most vulnerable in our communities who know of no other borrowing options.

“Often it feels like there is no alternative than to turn to loan sharks but many people don’t realise that debt advice and information is available for free. National Debtline is there to help.”

National Debtline’s advice includes getting in touch with lenders straight away to explain your difficulties, and not to give up trying to reach an agreement on repayment terms even if creditors are difficult.

The Department of Trade and Industry supports the many aspects of MAT’s activities; in particular, by providing £1million annually to National Debtline.

The Government is also providing £ 47.5 million in a two-year programme to fund face-to-face debt advice, helping tackle debt for tens of thousands of people.

This funding will pay for over 500 new debt advisers to help people get their debts under control, and will fulfil the Government’s commitment to achieve a step change in the availability of debt advice.

As part of the Face-to-Face Debt Advice project, financed by the Financial Inclusion Fund, MAT is providing training for the majority of the advisers due to be recruited over the next two years.

Consumers can call National Debtline, on 0808 808 4000.

For debt encumbered consumers who feel that turning to loansharks is their only option in obtaining the funds they need to alleviate their financial situation, there are very often legitmate lenders who, whilst charging higher rates than those offered by high street lenders to ‘prime’ borrowers. Sadly, ’sub-prime’ borrowers often believe that the only kind of lender available to them is a loanshark and don’t look for a legitmate alternative as a result. The truth is that there are niche lenders, funded by some of the biggest financial institutions in the world, whose business plan is built around high risk lending to sub-prime consumers whose circumstances may be as adverse as having dozens of CCJs, 12 month or more of mortgage arrears, or even in an IVA or bankruptcy! Such sub-prime loans do of course carry higher APRs, sometimes in excess of 20%, but nowhere near the levels charged by the loansharks, which can sometimes be over 1,000%.

Secured loans specialist The Loan Helper prides itself on delivering realistic and affordable solutions for homeowners unfortunate enough to find themselves in such dire financial circumstances. With a intimate knowledge of the lending criteria of the 16 lenders on it’s panel, The Loan Helper’s expert staff can usually help beleaguered borrowers to turn their finances around with an appropriate and affordable lending solution. You can contact The Loan Helper on 0845 003 0066 or by sending an enquiry via their website at www.theloanhelper.co.uk.