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Whether you are looking for money to help you with debt consolidation or home improvements, a secured loan can be a great option. According to the Secured Loans Index, over 2000 secured loans were advanced in March 2021, representing total lending of £91.4 million. Compared to February 2021, this was an increase of 31% month-over-month growth.
Understandably, the secured loan levels in 2019 were much higher compared to 2020 because of the effects of the Coronavirus pandemic on the economy. In terms of completion times, secured loans average 12 to 13 days which means faster access to cash compared to mortgages that may take months to complete and access funds.
If you’ve been struggling to understand the secured loans market, the advantage these loans have over remortgages, and how to find the best deal, you are in the right space, read on!
Secured loans refer to funding that is collateralised. This means to qualify and access funding, you’ll need to provide security in the form of assets such as your vehicle, home or any other property you own. Generally, the amount you can borrow is largely dependent on the value of your assets such as your home equity as well as your credit history and financial status.
Much like unsecured personal loans, secured loans enable you to borrow a certain amount of money at pre-agreed periodic instalments and times. However, with a secured loan in the event you default on the loan repayment, the lender can foreclose on, repossess, or otherwise seize the underlying asset to help them recoup any balances outstanding.
Because of the repossession clause and the sense of security this feature gives to the lenders, secured loans are also known as second charge mortgages or homeowner loans. But the security this gives lenders also means you can generally borrow larger amounts at much lower interest rates.
There are a number of reasons why you might choose to use a secured loan rather than a remortgage. Here are some of the top reasons:
If you can’t or don’t want to remortgage your property, taking out a secured loan instead of a personal loan can be a good financial move. However, the question is, how and where do you find a secured loan?
One thing you’ll note is that high street banks typically don’t offer secured loans despite their popularity in the UK market. For these loans, you’ll have to use a licenced secured loan broker like Solution Loans. The beauty with brokers is that they work with many lenders which means you get the benefit of side-by-side comparisons to get a loan that meets your conditions.
These brokers allow you to compare hundreds of secured loans from some of the top UK lenders. This gives you visibility on the APRs you are to pay, the loan duration and other covenants such as interest rate fixing for a certain period.
Secured loan brokers also have CeMAP-qualified and highly knowledgeable teams that you can talk to on a personal level. They are in a much better position to advise you on the different types of secured loans available based on factors such as the amount you want to borrow, why you want to borrow, and loan duration.
Before you take out a secured loan, contact your mortgage lender to find out the best deal they can offer you. This may seem like a detour, but some lenders have special offers for borrowers who have been consistent in repaying their mortgages.
If you don’t find anything attractive with your current mortgage lender, get a secured loan broker to help you out. There are two main ways you can approach brokers:
As you engage secured loan brokers, there are certain things you need to be clear on to get the best deals. Here are some of the top issues to consider:
Instead of making lots of loan applications at one go, use the eligibility checker on the brokers’ comparison websites to find out your chances of getting accepted. Most lenders carry out hard credit checks on your file for every credit application you make and this could jeopardise your chances of getting approved.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley
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