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What is a secured loan?
A secured loan is a debt secured on your home that is separate to a mortgage.
Because they are secured on a home, they are only available to homeowners with a level of equity, which is why they can also be called home equity loans. With a secured loan, you continue to pay your mortgage as they are maintained separately.
Our team of experienced advisors have helped many people to get a great deal on a secured loan. As a whole-of-market broker, we work with many lenders to get you the best rates possible. To get started, complete our simple online form today, or keep reading to learn more.
How do homeowner loans work?
Your secured loan lender will assess the value of your property and secure the loan against your home as security.
A few points to make:
- The term for repayment can typically be anywhere from 1 year to 35 years.
- You will pay interest on the loan, as with any other loan, so by paying more over a shorter period you will pay less overall.
- Some lenders will levy a fine for early repayments.
What are the benefits of a secured loan?
They can be speedy to arrange, depending on the circumstances, which can help if you need a rapid cash injection.
How much can I borrow with a secured loan
The amount you will be able to borrow with a secured loan will depend on a range of criteria. All lenders will have different eligibility and affordability requirements, but generally, they will consider:
- The Loan to Value ratio
- Your income and credit rating
- What the loan is to be used for
- Your age.
Can I get a secured loan with bad credit?
While it is not impossible to get a secured loan with bad credit, it is less straightforward.
We have helped many people with bad credit to get a secured loan. There are many reasons why you might have bad credit, ranging from missing a few payments through to IVAs and bankruptcy.
There are a few things you can do to improve your rating before making an application, however, it can take a few months before you see real improvements to your credit score.
- Access your credit report with the major agencies
- Check for any inaccuracies and apply for amendments if necessary
- Use credit sensibly and make repayments on time.
How does income affect secured loans?
Your income will play a role in the lender assessment of your secured loan application.
If you have a stable income, you will be deemed as lower risk in comparison to someone whose income varies, for example, if they are self-employed or are paid mostly in commission. Self-employed people are generally required to provide a minimum of three years of trading history, however, some lenders will consider less.
Our advisors can help to recommend the best lenders, depending on your situation.
Secured loans for pensioners
Being retired doesn't preclude you from getting a secured loan.
Assuming the lender is confident in your ability to make repayments long term, you are likely to be eligible. While some lenders have a maximum applicant age limit of 75, other lenders go beyond 80.
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Secured loans for first time buyers
Generally, lenders for secured loans will require ownership for a minimum of six months before agreeing to a loan. If you have minimal equity in the property, as is typical for many first-time buyers, you may be deemed as higher risk. Get in touch with one of our advisors to learn more.
Can you get a secured loan for a non-standard property?
While it is more complicated to secure a loan against a non-standard property, it is not impossible.
Non-standard properties, for example, those with thatched roofs or listed buildings, are more niche and therefore are deemed more challenging to sell. As a homeowner loan is secured against the property, non-standard properties are seen as higher risk, meaning there is a reduced pool of lenders available.
Our advisors can help you to find the perfect lender for your non-standard property.
Unencumbered properties and secured loans
You may find it more challenging to get a secured loan on a property without a mortgage or secured loan already against it. This is because they tend to be secured over the top of a first charge mortgage. If this is your situation, let our advisors help.
What can secured loans be used for?
Secured loans are used for a range of purposes.
Many homeowners with debt can use a secured loan to consolidate their debt, which can provide a lower interest rate than unsecured loans. You may find that if you have bad credit you are offered a less favourable rate, with a reduced Loan to Value offer.
Home improvement activity is the other main reason why people go for homeowner loans. If you are planning an extension or garage conversion, for example, you may decide to get a homeowner loan to fund the development.
Secured loans for buy-to-let properties
It is possible to get a secured loan on a buy-to-let property. However, the pool of willing lenders is reduced as buy-to-let properties are seen as riskier. For more information, get in touch with one of our team who can help you to find the perfect lender.
What happens if you don't pay back a secured loan?
As the loan is secured on your property, if you fail to make repayments, there is a risk that your home will be repossessed.
A homeowner loan comes second in terms of the order of payment if this happens. This means that your mortgage will be paid from the proceeds of the sale first, with the homeowner loan being paid second. If there is not enough cash generated from the sale to cover both the mortgage and the secured loan, you may have to enter into an IVA or declare yourself as bankrupt.
What are the alternatives to homeowner loans
There are a few alternatives to consider when deciding on a homeowner loan.
The obvious option is to remortgage. You might be able to find a better mortgage deal that frees up the cash you need without entering into a new loan agreement. You could also consider a personal loan or 0% credit card depending on the level of spend, which will not be secured on your property.
How can I learn more?
Our team of advisors are waiting to hear from you, complete our simple form today to get started.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.