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Secured loans can be useful when you need to borrow larger amounts, but they come with important risks. If you fall behind on secured loan payments, you could put your home or other valuable assets at risk because the loan is “secured” against something you own. This means that the lender can take action to recover the debt if repayments aren’t kept up.
Dealing with secured loan debt can feel overwhelming, especially when the consequences affect your home or car. But understanding how secured loans work, what happens if you miss payments, and how to manage or restructure your debt can help you make informed decisions and avoid escalation.
The below content explains what a secured loan is, how arrears happen, what your rights are, and what you can do if you’re struggling with secured loan debt.
A secured loan is a type of borrowing that is backed by an asset, usually something valuable like your home, a car, investment property, or other possessions. Because the loan is secured against that asset, the lender has greater protection and may be willing to offer:
Common examples of secured loans include:
If you meet the repayment terms, secured loans can be a cost-effective choice. However, if you fall behind, the lender has legal rights over the asset securing the debt.
When you take out a secured loan:
Because the loan is secured, lenders usually offer:
But this security also means that repayment is essential. If you fail to make regular payments, the lender may pursue the asset to recover their money.
Missing payments on a secured loan can quickly escalate into serious consequences.
Lenders will generally:
If repayments continue to be missed, lenders may take more serious steps, including:
For example:
This is why early engagement with lenders is crucial if you’re struggling with payments.
Secured loan arrears often build up when:
Because secured loans often involve large sums spread over many years, missing payments can quickly cause arrears to grow.
Aside from payment shortfalls, changes in asset value (e.g., housing market dips) may also affect your overall financial picture, though they don’t change your repayment responsibilities.
Lenders have legal rights when a secured loan falls into arrears, but they must follow formal procedures.
These usually include:
Early Arrears Stage
Later Arrears Stage
The type of action depends on your loan and the asset securing it.
For home-secured loans (like mortgages), lenders typically need a court order before repossession. For other secured assets (like vehicles with a fixed charge), repossession might be quicker.
Even when lenders have the legal right to enforce, they often prefer to work with you on an affordable solution first.
If you’re struggling with arrears, the earlier you act the better.
Steps to Take
Sometimes lenders will consider:
Be cautious about options that simply increase term length without reducing pressure, getting advice first is important.
Depending on your lender and your circumstances, you may be able to renegotiate your secured loan.
Common alternatives include:
Each option has potential risks and benefits, so careful evaluation is essential.
Yes, secured loan arrears are very much priority debts because the loan is backed by an asset. Repayment should be high on your priority list because:
Compared to unsecured debts like credit cards, secured loans usually have more serious consequences if unpaid.
If you truly cannot afford repayments, you have options, but they must be chosen carefully:
Review Your Full Financial Situation
Seek Professional Debt Advice
A debt adviser can help you:
Consider Wider Solutions If Appropriate
In some cases, especially when unsecured debts or household income issues are severe, a formal solution such as:
If you’re behind on secured loan payments or worried about falling into arrears, don’t ignore it. The earlier you take action, the more choices and flexibility you’re likely to have.
My Debt Plan offers clear, impartial advice to help you understand your options and get back on track. You can get debt help online or speak to our friendly team for a confidential, no-obligation conversation.
Call us today on 0161 464 0870 and take the first step toward a more secure financial future.
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Dependant on your circumstances and financial situation, we'll let you know if an IVA is a potential solution for you.
If you qualify for an IVA, we will take the necessary steps to set up and arrange this for you.
An Individual Voluntary Arrangement (IVA) is a formal agreement with creditors to repay a portion of your debts over time, but it does have an impact on your credit score and it will be difficult to obtain further credit whilst on an IVA. Once an IVA is approved, it is recorded on your credit report and will typically remain there for six years from the date it starts.
However, it’s important to note this is the case for most debt solutions and your credit score will likely already have been affected by being in debt in the first place.
Once your IVA is complete you will get a fresh start to begin rebuilding your credit rating.
IVA costs are charged for the preparation of your proposal and the administration of the arrangement for the full term (usually 5 years) these costs are charged from the monthly contributions you make into the IVA and are not in addition. Costs will only be recovered on approval of your arrangement and once you commence making payments to it. The fees for preparation of the proposal to creditors and calling the meeting for creditors to vote on its approval are called nominees fees, the fees for running the arrangement once approved are called supervisors fees. There are also some expenses incurred in the running of the arrangement such as the registration fee and the statutory insurance that needs to be taken by law, these are called disbursements. For our arrangements, the total of all of these is £3,650 although this may be adjusted by creditors when they vote on whether to accept. No matter what the end total of costs come to, you can be rest assured that these will be taken from the monthly payment we agree with you.
