5 steps to finding the cheapest secured loan

A secured personal loan can be seen as both a blessing and a curse depending upon your reason for needing to borrow money. And you should be fully aware of the reasons why before you even approach a secured loans company.

With UK pesonal debt at an all time high, the need to consolidate existing debts into a more affordable loan is the main reason why secured or homeowner loans remain so popular.

But with the average debt rising year on year, there's a real danger that secured lending could be seen as an easy solution to the cost of borrowing by spreading debts over longer and longer terms to reduce payments. This is where many experts take issue with secured loans in that they turn a short-term problem into a long-term one and make the overall cost of borrowing money even higher.

In response to this, many lenders say that borrowers need to take responsibility for their spending and that a secured loan can actually help people to do this. For those with a bad credit history a secured loan is often the only option and, used wisely, can be a way to improve cashflow and rebuild their credit history.

For many, a secured loan is a last resort in desperate times and can be a way out of financial problems when used as part of a recovery plan. So if you have no other choice, how do you make sure you get a good deal and find the cheapest secured loan possible?

How to find the cheapest secured loan first time

As with any financial product, but particularly those secured on your home, it's vital to start your search from a position of strength.

It's crucial to do your home work first to understand exactly what your options are and which one is right for your needs. Then you can go out into the market with a laser focus fully able to compare like with like and quickly identify the cheapest secured loan deals.

Whether you use the internet, read books on secured loans or visit a loan adviser, know what you're dealing with before you go anywhere near a secured loans company.

All lenders will do a credit check on you as part of the secured loan application process. To increase your chances of success you need to see what they will see when doing a credit check on you. By checking your credit report first you can identify any errors or problems that might result in you being offered a high rater or simply declined. You can buy a copy of your credit report from Experian which is one of the major credit reference agencies that lenders use themselves.

Lenders don't want to take on people they think are already over-indebted. So if you have any dormant credit cards, store cards or other forms of debt that you don't currently use, close them or consolidate down to one or two to reduce your access to debt.

Like any product, the real savings come from shopping around. Using the knowledge gained from step one, you should be able to quickly identify which secured loans are right for you and sort the bargains from the rip-offs. Use the internet to compare lots of deals and make a short list of the best three to approach.

Your credit report also shows any recent credit checks carried out on you, so if you make multiple applications ensure that lenders understand that you only need a quote. Multiple credit applications can make you look desperate and indicate that you have been rejected elsewhere.