Bad Credit Secured Loans

If you have bad credit and want to get a secured personal loan (sometimes called a ‘homeowner loan’ or ‘second charge mortgage’), there are key things to be aware of. Here we’ll explain how bad credit impacts your ability to borrow, what lenders look for in an applicant, and where to get expert advice.

Can you get a secured loan with bad credit?

Yes, it’s definitely possible if you approach the right lenders. Unlike some other forms of borrowing, getting a secured loan with bad credit can be easier because you’ll be using an asset like your property as collateral. This added security reduces the risk for lenders, but only some will still be willing to offer competitive rates and terms.

Bad credit issues you can get approved with

Each lender will have preferences for the types of adverse credit they will accept, but here are some examples of the bad credit issues that can be overcome:

• Low or no credit: There are lenders who will consider secured loan applicants if you’ve got a limited credit history or a low credit score.
• High credit utilisation: How much of your available credit you’re using will be a factor for some lenders, but each will have individual preferences around maximum percentages. 
• Missed or late payments: Some lenders will still offer a loan if you’ve had late payments on credit cards, loans, or utilities. 
• Defaults: You can get a secured loan with previous defaults, but sometimes it depends on how long ago this took place.
• CCJs: You’ll still be able to get a secured loan with a CCJ (County Court Judgement), depending on when the CCJ was registered or if it’s been satisfied.
• IVA: An IVA (Individual Voluntary Arrangement) can seriously limit your disposable income, but you can still get a secured loan because the asset you use as security is more important than your income.  
• Bankruptcy: Your choice of lenders will be severely limited, but a small few will still consider a secured loan after you’ve been discharged from bankruptcy (usually 12 months after the bankruptcy order).

It’s worth keeping in mind this isn’t a definitive list and each lender’s appetite for risk can shift depending on market conditions. So it’s often best to get some expert advice to see exactly what they will or won’t accept at a given time.

Lending criteria for secured loans with bad credit

Here are some of the main factors that will be considered by lenders when you’re applying for a secured personal loan with bad credit:

• Type and age of credit issue: Not all lenders will accept bad credit applicants and the specific type of adverse credit you’re dealing with (plus its age) can impact your ability to get a homeowner loan. 
• Collateral: The valuation and type of asset you’re using as security will make a difference to your choice of lenders if you’ve got bad credit. Typically, it’s easier to get a secured loan against property, but sometimes you can use other assets like a car.
• How much you’re borrowing: Lenders will have maximum caps in place for your total loan-to-value (LTV) ratio, which includes your existing mortgage plus the second charge mortgage, usually around an 85% LTV. The LTV limit can be stricter if you have bad credit, but not always. 
• Current income: Your income isn’t as significant as it is with other forms of borrowing because the asset you’re using as security for the loan is more important. However, some lenders may still have minimum salary requirements if you have bad credit. 
• Debt-to-income (DTI): For a secured loan with bad credit, lenders will check your total debt-to-income (DTI) ratio. This is calculated by dividing your existing monthly debt payments by your gross monthly income. Typically, lenders prefer if your DTI is under 40%.
• Purpose of loan: Most lenders want to know your plans for the funds. Certain lenders specialise in different areas and offer varying terms depending on your plans. For example, if you’ve got bad credit and it’s for debt consolidation, this could put some lenders off, but others might accept it.

How to get a homeowner loan with bad credit

Here are some straightforward steps to follow if you want to get a secured loan with bad credit:

1. Gather your details: Along with your documents (proof of address, ID, and 3 months of payslips and bank statements), you should get all the details relating to your credit history (and any debts). You should also have any key information relating to your property and a sensible plan for the secured loan. 

2. Get expert advice: Speaking to an expert bad credit advisor means they can take an in-depth look at your credit history, current finances, debt and property. After evaluating your situation and goals for the loan, an experienced advisor can explain all your options for approaching the best bad credit secured loan lender.

3. Apply for a loan: The major benefit of using a broker is that they can introduce you to a specialist bad credit lender that suits your specific type of adverse credit. This way they can maximise how much you can borrow while preventing any unnecessary rejections or marks on your credit file.

If you want to speak to one of our experienced brokers who specialises in bad credit secured loans, you can get started here with a free, no obligation chat:

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Bad credit secured loan lenders

Some high street lenders like NatWest and Santander may consider secured loan applications for mild credit issues, but it depends on the age and severity of your adverse credit. Also, you often have to be an existing mortgage customer, which limits your options.

In most cases, it’s best to approach specialist bad credit lenders for your secured loan because they can be much more flexible. For example, United Trust Bank and Together Money could be more suitable (especially if your adverse credit is from the last 12 months). 

The best way to see all your lending options for a secured loan with bad credit is to present your details to an expert advisor and have a discussion. They can evaluate your particular credit issue and then introduce you to the right lender for your situation and goals.

How much higher will the rates be?

If you approach mainstream lenders and major banks, you could face higher rates for your secured loan if you have a bad credit rating. However, there are specialist bad credit lenders who won’t penalise you for certain types of adverse credit. 

With these lenders, the asset you use as security (and its value) is often more important than your credit. Lenders who are comfortable with bad credit applicants can offer competitive rates for a secured personal loan based on the strength of the rest of your application, rather than your credit history alone.

Why choose Teito for your bad credit secured loan?

Getting a secured loan with bad credit can sometimes be challenging, but not with the right support. 

Our brokers have plenty of experience arranging homeowner loans for people with a range of bad credit issues. Their industry expertise and relationships with specialist lenders mean they can get the result you need.

Here are some of the reasons people with bad credit choose Teito for their secured personal loan:

• Our brokers specialise in secured loans for bad credit
• Your initial consultation is free with no obligation to proceed
• We can introduce you to niche bad credit lenders with competitive rates
• We are 5-star rated on leading review sites

Ready to take advantage of a free, no-obligation chat with a broker who specialises in secured loans for bad credit? Get started here.