What is a secured loan?
A secured loan can also be referred to as a second charge loan. Although it is not a mortgage, if you apply for a secured loan you should be aware that it works like one in that if you default on repayments, your home is at risk and could be repossessed. Buy contrast, if you default on payments on an unsecured loan, while your credit rating will be damaged, your home is left untouched.
What would I need to apply for a secured loan?
Before you apply for a secured loan you will need to own a property that has some equity in it, to which the loan can be secured. The lender will also want to see that you have an income with which you can make repayments on a secured loan. When you apply for a secured loan your credit score will also be put in the spotlight - and the cleaner it is the more providers and keener interest rates will be available to you.
Why would I apply for a secured loan over taking a mortgage then?
There are a number of good reasons why homeowners apply for a secured loan rather than remortgaging and releasing the equity. Firstly your mortgage could still be subject to tie-ins which, if broken, could result in thousands of pounds in early repayment charges.
In some circumstances it can also make sense to apply for a secured loan rather than take a further advance on your existing mortgage. For example your circumstances could have changed - such as your credit rating has been damaged or you have become self-employed - when you were initially granted the mortgage, and the lender is unwilling to lend further on these new terms.
It could also be that you need the money urgently so apply for a secured loan rather than use your mortgage, as this is typically a lot quicker.What should I know before I apply for a secured loan?
As borrowers are often limited in choice when they apply for a secured loan, the interest rates payable are more expensive than on a standard residential mortgage. However, the final rate you pay will depend on a number of factors such as your credit rating, salary and the amount you want to borrow against the value of your house - and of course, if you opt to use a broker to apply for a secured loan on your behalf.
Before you apply for a secured loan, it's important to be aware that, while loans below £25,000 are regulated by the Consumer Credit Act (CCA), secured loans above this amount are without regulation, meaning you will have limited recourse if you are unhappy with the product.
This is why it is especially important to use a broker like TMBL that has relationships and experience with a range of secure loan providers to apply for a secured loan on your behalf
How do I apply for a secured loan?
It's easy to apply for a secured loan - many are advertised on the television or in newspapers with phone numbers homeowners can call. But taking on a debt that can potentially put your home at risk, is nothing to be taken lightly and seeking professional advice before you apply for a secured loan is highly recommended.
0 comments:
Post a Comment