Secured loans: Interest rates

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If you’re repaying multiple debts and finding it difficult to stay on top of them all, or simply looking for a more manageable way to repay, a debt consolidation loan could help.

By combining your debts into a single monthly repayment, there’s only one thing to keep track of—giving you some additional peace of mind.

Of course, taking out a debt consolidation loan means applying for additional credit, which can be tough if you’ve got multiple existing debts or your credit score has taken a hit. This is where guarantors come in.

In this guide, we’ll explore what guarantors are, how they work when consolidating debts, and how you can check whether you need a guarantor.

If you have multiple forms of debt—whether through loans, credit cards, or overdrafts, for example—managing them all can be a hassle.

With a variety of repayment schedules and amounts to stay on top of, it could quickly start to feel overwhelming.

This is where debt consolidation loans come into play. By combining multiple debts into a single payment, there’s less to keep track of and a weight off your mind.

But who is eligible to consolidate debt, and what happens if you have a low credit score?

We’ll explain all in this guide to debt consolidation eligibility, so you can make an informed decision with confidence.

How do secured loan interest rates work—and how do you find the best rate?

When you borrow money, you repay the original amount borrowed along with an additional percentage on top. This is known as interest—it’s how lenders make a profit from the money they lend out.

An interest rate is the percentage used to calculate how much interest you repay on the debt. Interest rates vary between lenders and types of loan, so it can feel like a bit of a minefield at first.

But not to worry, it’s much simpler than it may seem! Join us as we demystify secured loan interest rates and explain how to get the best rate on a secured loan.

First thing’s first—what’s a secured loan?

What is a secured loan and how does it work?

A secured loan is a type of loan, through which the debt is “secured” against your property as collateral. In other words, the debt is tied to your home, providing additional security for lenders.

This means that they’ll be more comfortable lending higher amounts over longer periods, with less reliance on factors like your credit score.

However, your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Why do we pay interest on secured loans?

Simply put, interest exists so that lenders can benefit from providing loans.

Imagine you have £5,000 in savings and you agree to loan it out to another person, who will repay it to you in instalments. Once the money is repaid, you have the same £5,000 you started with and nothing else to show for it.

By charging interest, the lender is able to make a profit on the money they lend out. It’s as simple as that!

It also introduces a level of competition to the market—lenders that offer lower rates may appeal to more people. This means it can benefit people to shop around using platforms like Aro to check their eligibility and compare lenders

That said, it’s also important to note that the rate you’re offered is very much dependent on your credit history and personal circumstances – it’s not simply a case of which lender offers the lowest rate, you’ll need to qualify for it too.

How are secured loan interest rates calculated?

One of the most important things to know about interest rates on secured loans and mortgages is that they use a slightly different method of interest calculation. This is known as the annual percentage rate of charge, or APRC.


Normally, interest is calculated with something called an annual percentage rate (APR). This is essentially the interest rate the lender applies, combined with any additional fees they may charge. In other words, it exists to give you a clearer picture of how much you’ll be required to repay, so you can easily compare different finance products.

When you borrow with a secured loan—or a mortgage, which itself is a type of secured loan—the interest is calculated using something called annual percentage rate of charge (APRC).

It shows you the total cost of a secured loan, including fees, over the loan’s entire term. This is done to provide a more realistic view of the amount of interest you will pay.

How are the interest rates calculated?

Secured loan interest rates are more like mortgage interest rates. They’re generally lower than the interest rates on unsecured personal loans, as the loan terms are longer.

Secured loan rates are tied a lot more to the Bank of England base rate, meaning they tend to creep up in times of economic uncertainty. Nevertheless, secured loan rates tend to be below 20% APRC.

How to find the best secured loan interest rates for you

When you take out a secured loan, it’ll often be for a larger amount and spread over a longer period of time. Therefore, it pays to shop around for a good interest rate, as it can save you a lot of money in the long run.

Of course, with so many lenders out there, it can be a little daunting deciding where to start.

Thankfully, we’re here to help. We have access to the whole market for secured loans, and you can find out if you’re eligible with all our lenders from just one quick search.

Step 1: Check your eligibility

First thing’s first—head to our eligibility checker and enter a few details about yourself and what you’re looking for.

We’ll then use this information to run what’s known as a “soft search” on your credit history, which essentially means it doesn’t appear on or impact your credit report.

Step 2: We’ll let you know if you’re eligible

We’ll assess your eligibility against a number of lenders and present you with an offer we believe you will qualify for.

Take your time to look through. If you are happy to proceed, an adviser will then call you to discuss the application.

Step 3: Speak to a qualified adviser

An adviser will be in touch to discuss which rates are available to you, and to talk you through your options.

Take the first step to getting your secured loan

Ready to start exploring your options?

Head to our eligibility checker to check your eligibility for secured loans and compare lenders right away.

Simply enter a few details, along with the amount you want, and we’ll take care of the rest.

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