Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
When money changes hands between two private parties, a handshake rarely ends well. A secured personal loan agreement puts the arrangement in writing and ties repayment to something tangible: an asset owned by the borrower. If repayments stop, the lender has a defined route to recover what they are owed against that asset, rather than relying on hope or protracted debt recovery.
I'm Brad Askew, founder of LegalDocuments.co.uk and a Legal Tech Founder with a background in civil and commercial law. On this page I walk through how secured personal loans work in England and Wales, when they make sense, what needs to go into the paperwork, and where people tend to trip up.
Whether you are lending to a family member, a friend, or a small business contact, the principles below should help you set the arrangement up properly.
What this document is
A secured personal loan agreement is a contract that records the terms on which one party (the lender) advances money to another (the borrower), where repayment is backed by a specific asset belonging to the borrower. That asset acts as security: if the borrower fails to repay, the lender can look to the asset to recover the outstanding balance.
The security can be almost anything of identifiable value, including a vehicle, a boat, machinery, jewellery, or another item the borrower owns outright. The asset is usually described in detail within the agreement so there is no later argument about what is covered.
In many cases the borrower keeps possession and use of the asset while the loan is running, but the lender holds a contractual right over it until the debt is cleared. Some agreements also bring in a guarantor, a third party who agrees to step in and repay if the borrower defaults.
That gives the lender a second line of recovery alongside the asset itself. Where the loan is made in the course of a business to a consumer, separate consumer credit rules may apply, which is why these agreements are most commonly used between private individuals or in commercial contexts.
How to use this document
Agree the commercial terms first. Before drafting anything, both sides should talk through the amount being lent, the interest rate (if any), the repayment schedule, the end date, and exactly which asset will stand as security. Getting commercial agreement in principle avoids wasted effort and makes the written document faster to finalise.
Identify and describe the security asset precisely. Vague descriptions cause disputes. For a vehicle, capture make, model, registration, VIN and mileage. For machinery or goods, record serial numbers and location. The clearer the description, the harder it is for anyone to argue later about what the loan was actually secured against.
Decide whether a guarantor is involved. If the lender wants additional comfort, a guarantor can be added. The guarantor should read and sign the agreement knowingly, understanding they may be called on to repay. Guarantors should be encouraged to take their own independent view before signing, as their exposure can be significant.
Document default, interest and enforcement. Set out what counts as a default (missed payments, insolvency, selling the secured asset without consent), what happens next, and how the lender can enforce against the asset. Include any default interest, notice periods, and the borrower's right to cure missed payments within a reasonable window.
Sign, date and keep originals safe. Both parties (and the guarantor, if any) should sign and date the agreement, ideally with a witness to each signature. Keep original signed copies in a safe place. If the arrangement involves a registrable interest, such as a charge over company assets, make sure any registration steps are completed on time.
Q What is the difference between a secured and unsecured personal loan?
An unsecured loan is backed only by the borrower's promise to repay, so if they default the lender has to pursue them through the usual debt recovery routes. A secured loan is tied to a specific asset, which the lender can look to if repayments stop. Secured loans generally give the lender more protection, and for that reason borrowers can sometimes negotiate better terms.
Q What sorts of assets can be used as security?
In principle, any asset the borrower owns outright and can clearly identify. Common examples include vehicles, boats, caravans, business equipment, machinery, and valuable personal property such as jewellery or artwork. Land and buildings can also be used as security, but taking a charge over property usually involves additional formalities and registration at HM Land Registry, so those arrangements are typically handled separately.
Q Do I need a solicitor to put a secured loan agreement in place?
There is no legal requirement to involve a solicitor for a private secured loan, but both sides should understand exactly what they are signing. If the amount is significant, the asset is valuable, or a guarantor is involved, taking independent input before signing is sensible. For larger or more complex arrangements, particularly those involving business assets or land, professional input is strongly recommended.
Q Can I charge interest on a personal loan?
Yes, private lenders can charge interest, and the rate is generally a matter for the parties to agree in the contract. The rate and method of calculation should be stated clearly in the agreement. Be aware that lending money as a business activity to consumers may fall within consumer credit regulation, which brings additional rules, so purely private lending is where these agreements are most commonly used.
Q What happens if the borrower defaults?
The agreement should set out the consequences of default, which typically include the whole balance becoming immediately repayable and the lender gaining the right to enforce against the secured asset. Enforcement must follow what the contract allows and be done lawfully. If a guarantor has been named, the lender can also pursue them. Taking a measured approach and giving notice first usually produces a better outcome than rushing to enforce.
Q Can the borrower sell the secured asset while the loan is outstanding?
Not without the lender's consent. A properly drafted agreement will prohibit the borrower from selling, transferring, or further charging the secured asset without written permission, and will treat any attempt to do so as a default. This is why precise description of the asset matters, so there is no confusion about what is covered by the restriction.
Q Is a secured loan the same as a hire purchase or logbook loan?
No. Hire purchase agreements and logbook loans (bills of sale) are specific regulated products with their own legal frameworks and consumer protections. A secured personal loan agreement is a more general private contract between the parties. If you think your arrangement looks more like a regulated product, stop and check the position carefully before proceeding, because the rules are quite different.
Secured loans work well when the paperwork is clear, but the detail around the asset, default, and any guarantor is where arrangements often go wrong. An experienced legal adviser can talk you through the practicalities based on what you describe, so you feel sure about how to structure it before anything is signed.
✓A plain-English walkthrough of how secured loans work in your circumstances
✓Practical perspective on describing the security asset properly
✓What to watch out for around default and enforcement based on what you describe
✓Answers to your specific questions about guarantors, interest and repayment
Personal call · For information only · Independent advisers
Written & reviewed by
Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.
