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This tool is for guidance ONLY. It is designed to help you estimate loan repayments. It uses the representative APR of the product. Lenders have a duty to conduct affordability checks when you apply for a loan.
Representative example: Borrow £18,000 over 120 months at a rate of 7.3% per annum (partly fixed/partly vrbl). Repay £228.99 per month. Total to repay £27,478.80 comprising interest (£7,453.80), broker fee (£1,530) and lender fee (£495). Total overall cost 9.1% APRC. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
This tool is for guidance ONLY. It is designed to help you estimate loan repayments. It uses the representative APR of each product. Lenders have a duty to conduct affordability checks when you apply for a loan.
Representative example: Borrow £9,000 over 48 months. Repay £246.84 per month. Total charge for credit will be £2,848.42. Total amount repayable is £11,848.42. Representative APR 14.2% (vrbl)
Compare Secured Loans
Borrow from £5,000 to £250,000+
Compare 100s of secured loans. We’ll help you find the right one.
A secured loan could help you:
To be able to take advantage of this type of loan you need to own your home and have a mortgage on it.
We have access to over 600 secured loans from across the UK including some which suit people with a bad credit history.
What is a Secured Loan?
A secured loan is where you use your property as security or collateral to enable you to get a larger and possibly lower % cost loan than if it were unsecured. The provision of security also means that where you might have been rejected for an unsecured loan due to a bad credit rating you may still be able to obtain a secured loan.
SECURED LOANS FOR HOMEOWNERS
If you own your home then a secured homeowner loan allows you to borrow against the equity in your home. Typically rates are lower than with an unsecured personal loan.
Lending Criteria and Requirements
For a secured loan to be a viable option for you certain criteria need to be satisfied:
- You must own your home
- You must have a mortgage on the property – more info
- Your property must be worth more than your outstanding mortgage value – i.e. there must be free equity
- The free equity must be greater than the value of the loan you want
- You must meet the LTV (loan to value) limits set by our lenders – more info
You don’t necessarily need to be employed (i.e. you can be retired or be a pensioner), but you must be able to afford the loan repayments over the life of the loan. You don’t need a perfect credit history.
You need to understand that your property is at risk of being repossessed if you fail to keep up the loan repayments.
See an example of how these guidelines are used.
How to Get a Secured Loan
As property is involved with these loans there is more underwriting and checking to be done by lenders than with a personal loan. So, while you can obtain quotes on line now it is not possible to complete your full application in one sitting. You should assume it could take 3 weeks to obtain a secured loan. If you need a loan urgently then you must look at other options.
Our lenders only work through brokers like Solution Loans, so to get your quotes you need to complete the simple enquiry form. Within a few minutes our partner will then be in touch with the deals they have found for you.
Alternatively you can use our best buy tool to compare over 600 loan deals to decide which might suit you best – then click through and proceed.
The Advantages of a Secured Loan
Secured loans are less well known than their counterparts the Remortgage or the Unsecured (Personal) loan, but they are becoming much more popular. So, why would you want to consider one?
Secured Loans vs Unsecured (Personal) Loans
Secured loans have a number of advantages over personal loans:
- you can borrow much more – the maximum personal loan is limited to typically £15,000 – £25,000.
- the APR% is often lower – because the lender uses your home as security
- repayment periods can be longer – repay over 25 to 30 years (or less if you wish) compared to a maximum of 7 with a personal loan
- a poor credit history may be less of a barrier to obtaining credit.
But keep in mind that an personal loan does not require you to offer your home as security – your property is not (normally) at risk. When using a secured loan you need to have a mortgage already and have free equity1 in your property.
Secured Loans vs Remortgages
Compared to a remortgage a secured loan offers a number of benefits:
- it’s quicker to arrange (may be just 2-3 weeks)
- the set-up costs are lower and often not paid up front
- you can avoid the redemption penalties of your existing mortgage
- you won’t lose your really low mortgage rate (remortgaging would replace your previous mortgage)
- if you are self-employed then you stand a better chance of getting a loan
- historical credit problems aren’t such a big issue
- you are more likely to be able to raise funds for a non-standard purpose.
1 this is the value of your home less the remaining mortgage balance. For instance your home may be worth £230,000 and your mortgage balance is £70,000. The free equity in your home is therefore £160,000.
Bad Credit Secured Loans
You are not alone in having a credit problem. There are millions of UK residents who have varying degrees of bad credit (from simple missed payments through to CCJs and bankruptcy).While bad credit personal loans are available you could get a much better deal if you own your home and are prepared to offer it as security. Not only could a bad credit secured loan get you a lower rate but you may be able to borrow more, which could be useful if you are thinking of consolidating unsecured debts, for instance.
We have the widest choice of lenders offering secured loans. Our panel of around 15 lenders means we have the best choice of loan products many of which will suit people with credit problems.
But we really must emphasise that a secured loan is a significant commitment compared to a personal loan. You should think twice before using one if you have a poor credit history. Consider the purpose of the loan and whether it means you are taking on more debt or using it to reduce the cost of existing debt (i.e. debt consolidation). Is your financial situation (including your income) stable or is there any risk?
Remember that your home could be repossessed by a lender if you miss payments.
If you want to proceed and get a quote then simply complete our short enquiry form, and our partner will tell you what deals are available.
How likely is it I can get a Secured Loan?
Any lender is going to want to know that if they lend money to you it will get repaid on time and in full. So, as part of the application process they will:
- look at your credit file to see your credit behaviour and judge how creditworthy you currently are
- ask for income and expenditure information to ensure you could afford the loan repayments
- get a valuation of your property and compare that to your mortgage balance outstanding to calculate the free equity (which is really what the loan will be secured against).
If after considering all this, that you are likely to be a good prospect then they will make you a loan offer. The terms of the offer will include the maximum they will lend and also the %APR they will charge. Hopefully you will get offers from multiple lenders so you can choose between them.
What will a Secured Loan cost?
The interest rate you are offered will depend on a number of factors:
- Your credit rating
- The size of the loan compared to the amount of free equity in your property
- The length of time you want the loan for
When you receive your loan offers you can judge which lender to go with. You could also look at the cost compared to a personal loan. Perhaps you can get a competitive deal without having to provide your home as security.
Secured Loans Guide
If you’re uncertain which type of credit might suit you or you have a money problem then one of guides may help you. We summarise each type of loan and their pros and cons, and address issues regarding debt and credit ratings.
Secured Loan FAQs
Answers to Your Secured Loan Questions
Secured loans are so-called “second charge” loans. Only if there is a mortgage on a property (i.e. a “first charge” loan) can you obtain a “second charge” loan.
If you have paid off your mortgage completely and now need to borrow more then you’ll most probably have to remortgage your property.
The LTV is the ratio of maximum lending value to the property value. e.g. if the LTV is 60% and the property value is £190,000 then the maximum lending permitted is £114,000.
A lender is likely to offer a range of loan products with a range of LTVs and interest rates. It is typically the case that as the LTV% rises the interest rate on the loan rises too since the lender considers them to be more risky.
So, how do the LTV, mortgage values and a lender’s attitude to risk combine?
As an example imagine a lender sets the LTV on a loan to 60%. If your property has a market value of £220,000 then the LTV means that the maximum total lending against the property (first + second charge loans) is £132,000. If your mortgage balance is, say, £80,000 then this is deducted from the £132,000 giving a balance of £52,000 available to use.
But the lender may not offer you the full £52,000. The lender will assess your ability to repay a loan, and also judge your credit risk by looking at your credit history. All lenders have a duty to lend responsibly.
Like many in the UK you might have built up a large personal debt – things like credit cards, car finance, bank overdrafts, payday loans, etc. All of these forms of debt tend to have high monthly interest costs and can be a serious drain on your monthly budget. The average personal debt (exc. mortgages) in the UK is £3200, with many owing much, much more.
So, when trying to get to grips with your debt you can look to consolidate it all into a secured loan at a lower rate, and if necessary extend the repayment period to further reduce your monthly payments – but take care not to extend the repayment period longer than necessary as it may increase the overall costs of the debt.
Remember that by securing your loan on your property you risk losing it if you don’t keep up loan repayments.
As you’ll see above these loans have numerous good points, but you should remember three things if you are thinking of using one:
- your property acts as security for the loan – you risk losing your house if you fail to keep up your loan repayments.
- you may be tempted to extend the repayment period to reduce your monthly payment, but doing so may increase the total amount you repay over the life of the loan.
- the process of moving home becomes a bit more complex – you’ll have a bit more paperwork to deal with.
The thing to do is use our Find a Loan tool. It will help you to identify many of the options available to you based on no more than 4 simple questions. Give it a go!
Yes, you can repay your loan early but keep in mind that lenders typically make an early settlement charge of approximately 2 months’ interest. Some lenders may also levy an “administration” or “discharge” fee when you settle your loan.
It is important that before you enter into any loan contract that you have read the terms and have fully understood what charges could be made. These potential costs could influence your choice of lender.
Normally you would pay off the loan with proceeds from the sale of your home – so long as doing so will mean you have a large enough deposit for the purchase of your new property. If this is not the case then in some instances you can transfer the loan to your new property – this depends on the lender you have, so if this flexibility is important to you then choose your lender with care.
If your secured lender won’t let you transfer the loan to your next property then you could pay it off with a new personal loan taking into account that there may be fees to be paid for settling your loan early.
In simple terms yes – although in reality you would do this by taking out a new personal loan of an amount equal to the balance remaining of your secured loan (plus any exit fees) and using this to settle it.
Yes, you can do either of the following:
- When you remortgage increase the mortgage value so that it covers the amount outstanding on the secured loan. And then pay off this loan (taking into account any exit fees).
- Remortgage and keep the loan and transfer it – but you can only do this if your secured lender permits this. If they won’t then you’ll need to follow option 1.
Lenders recognise that there is a proportion of people who for one reason or another have incurred negative marks on their credit file. Yet, those people may own their home and have a decent income. While a personal loan provider my reject an applicant a secured lender has much more flexibility to accept the person’s enquiry.
Being able to secure a loan on a property allows the lender to see a lending opportunity where an personal loan lender might only see risk.
These loans are no different to any other form of credit when it comes to the recording of your financial behaviour. All repayments and missed payments are recorded on your credit files at the UK three main credit reference agencies.
So, if you manage your loan properly and ensure that your payments are all on time and paid in full then this good news will gradually replace any bad news on your file and your credit rating will improve.
Missing payments will always be recorded on your credit file so affecting your credit rating. But the key question with one of these loans is whether the lender would repossess your home? Nominally they are legally able to but in reality this would be a last resort just as it would be if you missed a mortgage payment.
The lender would work with you to get your payments back on track. What you should always do, as with any credit you have, is immediately talk to your lender when you realise you are going to have a payment issue. This route is more likely to get you a sympathtic hearing.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.
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