What are the benefits of using a secured loan to fund a large personal project (like a wedding or car)?
13th February 2026
By ProMoney
A secured loan, often backed by the borrower’s property, can be a highly effective financing method for large, one-off personal expenditures such as funding a wedding, purchasing a significant vehicle, or undertaking extensive home renovations. By using an asset as collateral, lenders typically offer more favourable terms, including lower interest rates and longer repayment schedules, compared to standard unsecured borrowing.
What are the benefits of using a secured loan to fund a large personal project (like a wedding or car)?
Funding a major personal expense requires careful consideration of financing options. When sums needed exceed typical personal loan limits—often £25,000—a secured loan, also known as a homeowner loan or second-charge mortgage, becomes a viable solution. Secured loans are defined by the requirement that the borrower pledges an asset, usually their home, as security against the debt. This arrangement significantly lowers the risk for the lender, translating into substantial benefits for the borrower.
Understanding the Financial Advantages of Secured Loans
The primary appeal of using a secured loan for a substantial project is the enhanced financial flexibility and potentially reduced overall cost of borrowing compared to unsecured options.
1. Access to Higher Borrowing Limits
Unsecured personal loans have strict ceilings, often capping amounts around £25,000 to £35,000, regardless of the borrower’s income or credit history. Large projects, such as a major home extension, a high-value car purchase, or an elaborate wedding, often cost significantly more.
Secured loans leverage the equity built up in your property. Because the lender has collateral, they are generally willing to lend much larger sums—often tens or even hundreds of thousands of pounds—provided the Loan-to-Value (LTV) ratio remains acceptable. This means you can fund the entire project with a single financial product, simplifying your debt management.
2. Typically Lower Interest Rates
Risk is directly correlated with interest rates. Since a secured loan is backed by tangible collateral, the lender’s risk of loss is significantly mitigated. If the borrower defaults, the lender has the legal right to pursue the recovery of the debt through the security asset.
As a result of this reduced risk profile, secured loans typically feature interest rates that are lower than those offered on comparable high-value unsecured loans or credit cards. Over the long term and across a large borrowed sum, this difference in interest rate can save the borrower thousands of pounds.
3. Longer and More Flexible Repayment Terms
Secured loans usually offer much longer repayment terms than unsecured loans. While a standard personal loan might offer terms up to five or seven years, secured loans often extend repayment periods up to 15, 20, or even 25 years. This flexibility provides several key benefits:
- Reduced Monthly Payments: Spreading the cost over a longer duration significantly lowers the monthly repayment amount, making the debt more manageable and easing pressure on immediate household budgets.
- Budget Stability: Predictable, fixed monthly repayments allow for better long-term financial planning, crucial when managing simultaneous household expenses.
Practical Applications: Why Choose a Secured Loan for Specific Projects
A secured loan is highly suited for projects that require a substantial outlay and whose value may partially justify the long-term debt.
Funding Your Dream Wedding
UK weddings often cost tens of thousands of pounds. While it might seem counter-intuitive to use property equity to fund a celebration, a secured loan provides a structured way to pay for the event without resorting to high-interest credit card debt or multiple smaller, scattered loans. The longer repayment term allows couples to manage the debt comfortably as they settle into married life.
Purchasing a High-Value Vehicle
While specialist car finance is available, secured loans can be competitive for high-end or classic vehicles where the required capital exceeds standard lending limits. Unlike Hire Purchase (HP) or Personal Contract Purchase (PCP) deals, the secured loan gives you outright ownership of the vehicle immediately, though it is the equity in your home, not the car itself, that acts as collateral.
Consolidating Existing Debts
If you are undertaking a large project and also carrying high-interest existing debts (like credit card balances or expensive short-term loans), a secured loan can often include an amount for debt consolidation. Rolling high-interest debts into the lower interest rate and longer term of a secured loan can simplify finances and potentially reduce the total amount of interest paid.
For more guidance on managing large debts and understanding various borrowing options, you can check resources provided by the Government-backed MoneyHelper service.
Eligibility, Credit Checks, and Application Requirements
To qualify for a secured loan, you must own property in the UK and have sufficient equity available. Lenders will assess your affordability based on income, outstanding debts, and credit history.
Affordability and Credit Assessment
Lenders must ensure that the repayments are sustainable alongside your existing financial commitments. A crucial part of this process involves a thorough credit check.
It is always recommended to review your credit file before applying for any major financial product. This allows you to identify and correct any errors that might negatively affect the lender’s assessment.
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The Essential Risks of Secured Borrowing
While the benefits of secured borrowing are significant, it is paramount to understand the risks involved. Secured loans are a serious financial commitment because the security asset is your home or other property.
Risk of Repossession and Financial Harm
The principal risk is the potential loss of your property. By signing the agreement, you legally consent to the property being used as collateral. If you experience financial hardship and consistently fail to meet the contracted repayments, the lender has the right to initiate legal proceedings to recover the debt.
Your property may be at risk if repayments are not made. Consequences of default can include legal action, repossession, increased interest rates, and the imposition of additional fees and charges. It is vital to have a realistic plan for maintaining repayments for the entire term of the loan.
Impact on Equity and Future Borrowing
Taking out a secured loan reduces the equity available in your property. This can affect your ability to remortgage or take out further borrowing in the future. You should always consider how a second-charge mortgage impacts your overall financial portfolio and long-term property ownership plans.
People also asked
Can I use a secured loan if I already have a mortgage?
Yes, secured loans are often structured as a second-charge mortgage. This means the loan sits behind your primary mortgage; if you default, the first-charge mortgage provider is paid back before the secured loan provider from the proceeds of the sale, but you must keep up repayments on both.
Is a secured loan cheaper than a personal loan for a large project?
Generally, yes, for large amounts (£25,000+). Because the secured loan is backed by collateral, the interest rate offered is typically lower than the rate you would receive on an equivalent high-value unsecured personal loan, leading to lower overall borrowing costs.
How long does it take to get a secured loan approved?
Secured loan applications typically take longer than unsecured loans because they involve additional property valuation and legal work. The process can take anywhere from a few weeks to several months, depending on the complexity of your financial situation and the speed of the valuation and legal teams.
Do I need full equity in my home to qualify for a secured loan?
No, you do not need full equity, but you must have sufficient equity available to secure the loan. Lenders assess the amount based on the current value of your property versus the outstanding balance of your primary mortgage and the size of the new loan required (the LTV ratio).
What happens if I sell my house while I still have a secured loan?
When you sell the property used as security, the outstanding balance of the secured loan (alongside the primary mortgage) must be fully repaid using the proceeds of the sale before the remaining funds are released to you. Secured loans usually do not allow you to transfer the security to a new property easily.
Conclusion
For UK homeowners needing significant capital to fund a large personal project—whether it’s the wedding of a lifetime or a crucial high-value purchase—a secured loan offers compelling financial benefits. The combination of lower interest rates, high borrowing limits, and extended repayment terms makes it a powerful financing tool.
However, the decision must be approached with caution and full awareness of the significant risk involved. Before proceeding, potential borrowers should thoroughly review their financial stability and seek professional advice to ensure they can sustain the repayments over the full term without jeopardising their primary asset.