What is a secured loan and how does it differ from a personal loan?
A secured loan is essentially a second loan put behind a traditional first charge mortgage. The secured element comes from the right the lender will have to potentially repossessing the property should there be a failure to pay the debts. So in short, if you are looking for a secured loan you will need to own a property first and will have serious consequences if it’s not repaid.
How does it actually work?
Secured loan product advice can work very differently depending on the case circumstances. For example, getting a secured loan on your residential home where you and your family reside is now seen as a regulated activity which means a suitably qualified broker, such as Niche Advice will need to be consulted to give you the correct level of advice. However, if the property is a buy to let and you want to raise some equity, this will be seen as a non-regulated activity, which will have its own set of rules and product criteria.
How does it differ to a personal loan?
Personal loans are often only really available at good rates for applicants who have got a very good credit profile. They are also generally only available on smaller sums of money, typically from a few thousand pounds to about £35,000. However, secured loans can go up considerably depending on the applicant’s affordability.
As there are no guarantees the personal loan Lenders are very cautious in lending large sums of money at competitive rates. So generally, you may find that the rates quoted on the comparison sites are nowhere to be seen when it comes to actually securing a product. For example often rates quoted for many head line personal loans rates are based on a loan amount of under £5,000 with anything above being offered at a different rate.
Secured loan terms are also more flexible and can be taken over a longer period of time. Typically you will find personal loans are generally cutting off around five years. However, secured loans over a much longer term can be taken, which means the loan repayments can be more affordable to the applicant. You should bear in mind that stretching the loan period can have a negative effect on the actual debt.
Why you might want to take out a secured loan
- Consolidate personal loans and credit cards.
- Keep existing first charge mortgage as it is on a good rate.
- Pay bills including HRMC tax returns.
- To invest into business.
- Refurbish property where traditional mortgage funding is not available.
- Acquire or refinance commercial property.
- Release capital from a buy to let portfolio to fund further property purchases.
- Fund major capital expenditure such as weddings, holiday of a lifetime, car purchase etc.
- Marital break-up – equity buy-outs.
- Unable to obtain a remortgage due to credit problems.
- Recently self-employed without accounts.
- Need funds quickly.
If you’re searching the Internet looking for secured loan options why not give us a call so we can better understand your current circumstances. Niche Advice and its partners have helped many clients with secured loans and are happy to talk to you about your current circumstances.
For more information on how we can help you with secured loans , please contact us on 0207 993 2044 or alternatively complete the simple enquiry form on the top right hand side of this page.
Typical APR 11.8% variable
NICHE ADVICE LIMITED IS REGULATED BY THE BY THE FINANCIAL CONDUCT AUTHORITY.
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. ALL LOANS ARE SECURED ON PROPERTY AND ARE SUBJECT TO STATUS. A FEE PAYBALE OF UP TON 15% MAY BE PAYABLE FOR SECURED LOANS BUT NOT UNTILL COMPLETION OF THE CASE.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
IF YOU CHOOSE A VARIABLE RATE LOAN THE COST OF YOUR PAYMENTS MAY INCREASE.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.