How much can you afford to borrow on a secured loan?

If you are considering a secured loan, the most important factor before you even set out to find the right secured loan for you is affordability. While on paper a loan can seem affordable, you really need to sit down and draw up a proper budget. This way you can ensure that you can comfortably meet the repayments.

This is because if you take out a secured loan and you find that you cannot meet your monthly repayments, you could find yourself losing your home.

The first thing to do is to draw up a list of your income and expenditure. Write down your current net income and then list all your outgoings, from your mortgage to fuel/transport costs; food and insurances, utility bills and regular savings, even clothing and vets bills.

Look at the remainder and then halve it. Ideally, this is the amount that you can afford to spend out each month on a secured loan.

Do also take in to account that your circumstances can change. While you may be able to comfortably afford a loan now, have you thought what will happen if you are made redundant? Or you take a lesser paid job? Or your ‘guaranteed’ overtime dries up? What will happen then?

Finally, do remember that, in life, nothing is for free! Secured loans do cost and by taking out a loan, you will be paying interest.

As an example, say you want a secured loan of £15,000 over 15 years. This will cost you £160.27 monthly on a loan with a rate of 9.9% APR. This sounds like a great amount to be paying every month. However, do bear in mind that the total interest you will pay over the period of the secured loan will be £13,849.38.