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Will consolidating debt into a secured loan reduce monthly repayments?
Derin Clark

Derin Clark

Online Reporter
Published: 26/11/2020

With the current economic uncertainty, borrowers with a high amount of outstanding personal debts will likely be looking for ways to reduce their repayments and make the debts more manageable. For many, consolidating debt into a loan provides an easy and efficient way of managing the debt and can also reduce the monthly repayments.

Although a personal loan is often the most common way for borrowers to reduce debt, for those with a significant amount of outstanding debt, a secured loan might be an option.

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The options available if you need to borrow to help pay for Christmas

With just a week left to Black Friday, the Christmas shopping season has already begun and consumers across the UK will be deciding how much they have available to pay for this year’s Christmas.

According to YouGov survey, last year the average UK consumer spent £1,116 at Christmas. Although spending is expected to fall this year, consumers are still expected to spend hundreds of pounds during the festive period. For those who have seen their Christmas spending creep over their festive budget and who are certain that they will be able to meet repayments, borrowing could be an option to help pay for this year’s Christmas.

Here, we’ve taken a look at the best options available if you need to borrow up to £1,000 to help pay for Christmas 2020.

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Need a secured loan? How will lockdown two affect your chances?

As we reach halfway through the second UK lockdown and with Christmas approaching, many households will be reviewing their finances to make sure they are in a good state for the new year. This review may include consolidating debt to reduce the overall cost of interest and the monthly costs of finance payments. One of the most common forms of debt consolidation is a secured loan, with 61% of these in October for the purposes of debt consolidation according to insight from Loans Warehouse. A secured loan does use the borrower’s property as security for the lender for the loan, which means the borrower’s property is at risk if they fail to make their loan repayments.


Those wanting to consolidate their existing debts using a secured loan will find that lenders and the availability of secured loans is in good shape right now. Insight from Moneyfacts.co.uk’s preferred secured loans broker, Loans Warehouse, has reported stability in the secured lending market, with no significant changes or restrictions in criteria for those needing a secured loan during the second lockdown.


During the first lockdown that started in March 2020, secured lending figures dropped by 80% as a result of not being able to conduct physical valuations on properties and as lenders adjusted to home working operations. The current lockdown is different, as there is no restriction on valuations taking place in person and lenders are using desktop valuation tools where possible instead.


The Finance and Leasing Association (FLA), the trade body representing the secured lending market, reported continued growth of secured loans in September, with the highest level of new business this year since March.


Fiona Hoyle, head of consumer & mortgage finance at the FLA, said: “The second charge mortgage market continued to recover in September, recording its highest monthly level of new business since March this year. As the UK enters a new phase of lockdown restrictions, lenders are continuing to do all they can to support customers during this challenging period. If customers are experiencing payment difficulties, we urge them to contact their lender as soon as possible.”


Despite lenders returning to the market after the first lockdown, the gap that resulted from the Spring lockdown has not been recovered, with the total number of secured loans completed still 40% behind the same period last year. There are positive signs though, as Loans Warehouse reports that in October lending volumes saw growth, with 31% more loans completing compared to September.

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Is a secured loan a good borrowing option for funding home improvements?

Homeowners looking to make home improvements or renovations to their property will often consider remortgaging at a higher loan-to-value (LTV) to release some of the equity in their home to pay for the work. But, with mortgage lenders withdrawing high LTV products from the market in response to the economic uncertainty caused by the Coronavirus pandemic, this option may not be as easily available as before.

Our research has found that there are currently 283 remortgage deals available at an 85% LTV or higher. Of these, 236 are available at an 85% LTV, 38 at a 90% LTV, and just nine at a 95% LTV. In contrast, those looking to remortgage at an 80% LTV have 381 deals to choose from. As a result, those at an 85% LTV and who are looking to borrow additional money when remortgaging could struggle to get a deal and may want to consider a secured loan instead.

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Coronavirus dries up lending – what to do if you need a loan right now

Since April getting accepted for a personal loan has become significantly harder as lenders restricted lending to protect themselves from the risk of rising unemployment and a worsening economy due to the Coronavirus pandemic. Amigo Loans publicly removed themselves from the market only accepting applications from key workers in emergency situations while other lenders have either temporarily paused applications or restricted lending.


This lack of supply along with a drop in consumer confidence led to a 59% reduction in loans during lockdown (April to June 2020) compared to the first three months of 2020. Lenders not only restricted lending to protect themselves from the risk of potentially greater defaults in the future but they also faced operational difficulties arising from the Government’s job retention scheme. Lenders could not easily tell if a loan applicant was receiving pay from the furlough scheme or not. With millions of people furloughed and the Office for Budget responsibility forecasting three million unemployed by the end of the year many lenders decided the risk was just too great.
This uncertainty and risk led many lenders to lift the drawbridge up on unsecured lending, with the expectation that they may not return properly until or after the furlough scheme finishes at the end of October.

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The options available if you are looking to consolidate debt

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Borrowing rates 2020 – what are the lowest personal loan and credit card rates?

6th August 2020

Today it was announced that the Bank of England has held base rate at 0.1%. While this may seem like good news for consumers looking to borrow money, our research has found that over the last few months, interest rates on loans and credit cards have increased

Here we’ve looked at what has been happening to personal loan and credit card rates since the beginning of 2020 and highlight some of the lowest rates available

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Coronavirus dries up lending – what to do if you need a loan right now

24th September 2020

Since April getting accepted for a personal loan has become significantly harder as lenders restricted lending to protect themselves from the risk of rising unemployment and a worsening economy due to the Coronavirus pandemic.

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Blue Monday hits nation’s finances

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Today has been dubbed Blue Monday – the most depressing day of the year – and considering how many people could be battling with their finances this month, it’s little wonder.

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Will consolidating debt into a secured loan reduce monthly repayments?

26th November 2020

With the current economic uncertainty, borrowers with a high amount of outstanding personal debts will likely be looking for ways to reduce their repayments and make the debts more manageable

With the current economic uncertainty, borrowers with a high amount of outstanding personal debts will likely be looking for ways to reduce their repayments and make the debts more manageable

Read More
news icon
What to do if your payment holiday is coming to an end

1st September 2020

The start of September will have many thinking about how to manage their finances as payment holidays on overdrafts, mortgages and credit cards will soon come to end.

The start of September will have many thinking about how to manage their finances as payment holidays on overdrafts, mortgages and credit cards will soon come t

Read More

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