HELOC vs secured loan: key differences

Choosing between flexible credit and a lump sum

Understanding the difference between a HELOC and a secured loan is not just a matter of labels - it changes how you access money, manage repayments and handle risk. In the UK, both are second-charge mortgages that sit alongside your main mortgage and are secured on your property. A HELOC is a revolving credit facility with an agreed limit you can draw from, repay and draw again during a set draw period, typically three to five years. You pay interest only on what you actually use. After that, you move into a repayment phase where the outstanding balance is paid off over a fixed term. By contrast, a secured loan gives you a one-off lump sum from day one, often at a fixed rate, with predictable monthly payments over an agreed term.

Why does this distinction matter? If your spending is phased or uncertain - think ongoing home improvements, professional courses or smoothing business cash flow - a HELOC’s flexibility can keep short-term costs lower because you are not paying interest on unused funds. If you know exactly how much you need for a single purpose, such as debt consolidation or a large renovation, a secured loan’s fixed structure offers clarity. Predictable payments help with budgeting and can limit total interest if you repay steadily from day one.

Pricing is critical. UK HELOCs often track the Bank of England base rate, so your cost can rise or fall with rate changes. Many secured loans are available with fixed rates, giving protection against rate shocks but potentially higher initial payments. Both options involve fees - set-up, arrangement, ongoing or early repayment charges - so the true cost is the interest plus all product charges.

Risk must be front of mind. Because both products are secured on your home, missed payments could lead to repossession. Lenders are FCA-regulated and will check affordability, but you should still stress test your budget against higher interest rates or temporary income dips. Taking on secured credit is a serious decision. Get clear on the total cost, the repayment rules and how each option fits your plans. Kandoo, as a UK-based retail finance broker, can help you compare second-charge options from regulated lenders so you can choose with confidence.

Clarity matters: match the product to your spending pattern, not the other way round.

Who this guidance will help

If you are a UK homeowner with available equity and need funds beyond typical personal loan limits, this comparison is for you. It suits people planning staged spending - like a multi-phase extension - or those who have a defined lump-sum need, such as consolidating multiple debts into a single monthly payment. It also helps self-employed borrowers who value cash flow flexibility but must remain mindful of variable-rate exposure. If you prefer certainty and a fixed budget line, you may lean towards a secured loan. If you want on-demand access and intend to borrow only in bursts, a HELOC could be the better fit. Kandoo can outline both routes and connect you with FCA-regulated lenders.

Your financing routes at a glance

1. HELOC - a revolving credit limit secured on your home with a draw period, interest charged only on funds used, usually variable rate, then a repayment phase.

2. Secured homeowner loan - a one-off lump sum secured on your property, commonly fixed rate, set monthly payments from day one over a defined term.

Costs, impact and key risks compared

Can you qualify?

Lenders will look at your property value, the equity available after your first mortgage and any existing secured charges. Maximum loan-to-value caps for second-charge borrowing commonly sit around the mid-80 percent range depending on the lender and your circumstances. Your income, credit history, age and current commitments will shape the maximum you can borrow and the term on offer. HELOCs may include additional criteria, such as minimum credit limits, product-specific maximums and how interest-only payments are assessed within affordability checks. Secured loans can run for longer terms, sometimes up to several decades, which can lower monthly payments but increase total interest over time. If you are using a significant portion of your equity, consider independent regulated advice.

Kandoo can help you compare multiple second-charge quotes side by side. We work with FCA-regulated lenders and can request representative APRC examples that include all known fees. Before applying, gather recent payslips or accounts, your mortgage statement, details of existing credit and an estimate of your property value to speed up a decision in principle.

From enquiry to funds - the practical steps

1. Outline needs, spend profile and preferred repayment style.

2. Check equity, LTV and your monthly affordability headroom.

3. Get quotes for HELOC and secured loan, including fees.

4. Model higher-rate scenarios to test payment resilience.

5. Choose product, confirm term, rate type and any penalties.

6. Submit application with documents and property valuation.

7. Legal checks complete, offer issued for your signature.

8. Funds released - draw as needed or receive lump sum.

Pros and cons to weigh up

What to check before you commit

Choosing between a HELOC and a secured loan should begin with your spending pattern. If your costs are staggered, a HELOC can keep interest down while you draw gradually. If you need a defined amount immediately, a secured loan’s clarity can win out. Always compare the total cost - not just the headline rate - including set-up charges, annual or maintenance fees, draw fees, broker fees and any early repayment penalties. Review the product rules carefully, especially HELOC draw period length, how the repayment phase works and whether rates are tied to the Bank of England base rate. Stress test your budget for higher rates and consider how your income might change. Because both are secured, ensure you have a contingency plan so repayments remain affordable. Use FCA-regulated lenders and consider regulated advice for complex circumstances or large borrowing.

Alternative ways to fund your plans

1. Further advance on your first mortgage - additional borrowing from your current lender, often at your mortgage rate.

2. Remortgage with additional borrowing - switch lender and raise funds, potentially resetting your main mortgage term.

3. Unsecured personal loan - quicker for smaller amounts, typically lower limits and shorter terms.

4. 0 percent purchase or balance transfer credit cards - suitable for short-term, disciplined borrowing if repaid before promotional periods end.

5. Savings or staged cash reserves - lowest cost if available without harming your emergency buffer.

Frequently asked questions

Q: How does a HELOC work in the UK? A: You receive a credit limit secured on your home. During the draw period you can take funds as needed and pay interest only on what you draw. After the draw window ends, you repay the remaining balance over a fixed term.

Q: When is a secured loan better than a HELOC? A: When you know the exact amount you need and want predictable payments. Debt consolidation and single large projects often suit fixed-rate, lump-sum borrowing.

Q: Do HELOC rates always move with the base rate? A: Many HELOCs are variable and track the Bank of England base rate plus a margin. Check your offer documents for how and when rates can change.

Q: Can I overpay or clear early? A: HELOCs may allow flexible repayments during the draw period, sometimes without penalty. Secured loans can have early repayment charges. Always confirm the fee rules before committing.

Q: What is the maximum I can borrow? A: It depends on your equity, income, credit profile, lender LTV caps and product limits. Second-charge borrowing commonly allows higher amounts than unsecured loans, subject to affordability checks.

Q: What are the main risks? A: Both are secured on your home. If you fall behind on repayments, you could lose your property. Variable-rate HELOCs also carry rate-rise risk.

Ready to compare your options?

If you are weighing flexibility against predictability, Kandoo can help you model both paths. We gather quotes from FCA-regulated UK lenders, show representative costs and stress test payments so you can choose with confidence. Share a few details and we will line up tailored options.

Important information

Kandoo is a UK-based retail finance broker, not a lender. All borrowing is subject to status, affordability and property checks. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Consider independent regulated advice for complex cases or large borrowing.