A secured loan for bad credit is the same as a standard secured loan, except that it's designed for people with a poor credit history.

Secured loans are sometimes known as second charge mortgages or homeowner loans, because they are often secured against your property – although, in truth, they can use any valuable asset as security. This could include your car or a motorbike.

If you can't pay back the loan, the lender has the right to take possession of whatever you've put up as security, then sell it to recover what you owe.

The amount you can borrow will depend on your property value, income, and financial circumstances, but secured loans for bad credit can be for anywhere from £5,000 to £1 million or more.

But if you have bad credit, it's likely that you won't be able to borrow as much as you could with a good credit score.

This is why, unless you need the money urgently, it may be worth working on improving your credit before opting to get a secured loan.

How your credit score affects your borrowing

The short answer is yes, in fact it's often easier to get a secured loan with bad credit than a typical personal loan because the lender has something to back up your promise to repay with.

That means secured loans for bad credit are available to people who have:

• Mortgage arrears

• County court judgments (CCJs)

• Other missed credit payments

Secured loans for bad credit usually come with higher interest rates and fees than are available to people with a good credit score, so they're typically more expensive. They also mean the asset you are securing them against is at risk if you fail to keep up payments.

This means that in some cases you may be better off raising the credit you need with a bad-credit credit card or work on improving your credit and get a personal loan, where your home or other asset is not at risk.

No, but the majority of lenders only work through brokers, meaning you can’t directly apply to them for a secured loan.

There are advantages to using a broker though. Firstly, they’re often able to provide an indication of the likelihood of your application being accepted before you apply.

As well as checking your circumstances – including any potential problems with credit – a good broker can also help you track down a loan suitable to your specific needs.

A poor credit history means you’re already financially vulnerable, so it’s important you understand how serious a commitment it will be to take out a bad credit secured loan.

With this in mind, make sure you:

• Don’t borrow more than you need

• Understand how long you’ll need to pay the loan back

• Can afford the monthly repayments on top of your regular outgoings

It’s also a good idea to check your credit record is both up to date and accurate before you go hunting for secured loans for poor credit – even if you’ve not previously run into problems.

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