Secured Loans

  • All Credit Situations Considered
  • No Impact on Credit Score
  • Low, Competitive Rates
  • No Hidden Charges

Secured Loans

  • All Credit Situations Considered
  • No Impact on Credit Score
  • Low, Competitive Rates
  • No Hidden Charges
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Author: Carl Shave - CEO and co-founder
Last updated: May 24th, 2022

Secured Loan Advice

With our extensive experience here at Just Mortgage Brokers, we endeavour to offer you the best solution in finding the secured loan that is right for you, whether you’re looking to renovate an existing property, complete a development project or place a deposit to add to your property portfolio. Secured loans are available for so many different reasons.

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Can I get a secured loan?

Obtaining a secured loan is very much the same as applying for a standard mortgage albeit the lenders criteria may differ slightly.  You will of course need to own your home that will be used for the security or a rental property should you be looking at a buy to let secured loan.

The availability is also invariably via specialist secured loan lenders as most main mortgage providers are not in this market.  The finance can also sometimes be referred to as a second charge mortgage due to the security sitting next in line behind your main mortgage loan.  Do however note that your legal obligations to ensure the loan payments are maintained are the same as for your main mortgage and the lender can still repossess your property if their payments are not kept up to date regardless of the payment situation of your main mortgage.

Although not a guarantee, due to the loan provider having a second charge over your property and not the first, expect the interest rate you are charged to be higher than that of similarly priced main mortgage products.  However, secured loans can still provide a cost effective way to borrow funds in the right circumstances.  This can be for situations such as, where your main mortgage provider cannot assist perhaps due to their assessment of affordability or your credit history, or where simply taking out a secured loan proves more cost effective then remortgaging.

Secured loans are generally regarded as a slightly more specialist area of the mortgage market and therefore should you be interested in seeing if this type of lending is right for you please contact us today where one of our advisers will be on hand to assist.

Criteria for a secured loan or second charge mortgage is very similar to that of a standard mortgage.  Also as with standard mortgage providers each will have its own individual set of rules as to how they assess you and your application.

There are perhaps some main broad differences that apply to most, such as:

  • Affordability:  Secured loan companies can on occasion offer slightly increased levels of loan sizes compared to main mortgage providers based on a more flexible approach to how they assess your ability to afford the loan.  They are however still regulated by the Financial Conduct Authority and have to apply a level of sensibility in their assessment.
  • Purpose of the loan:  Where main mortgage providers will be very specific about what the reasons are for any loans being applied for i.e. rarely will they permit for speculative or business purposes, secured loan companies will consider finance for any loan purpose including tax bills.
  • Loan to value:  This is one area where a secured loan may give greater restrictions than a main mortgage provider.  Generally speaking the maximum loan to value will be 85% for residential loans and 75% for buy to let finance.  This however is not necessarily the same right across the board so even if you may require more than this, it is still worth enquiring.

Much has changed in the buy to let market over the last few years and this in turn has also impacted buy to let mortgage criteria.   These changes have seen an increase in the level of buy to let secured loans where for many, improved assessments have enabled them to borrow funds that they perhaps would not have ordinarily been able.

As a secured loan is still a form of finance using the property as security, the main criteria remains constant in that the rentable value of the property will determine the level of borrowing permitted.  This is commonly referred to as the Interest Coverage Ratio or ICR.  However some secured loan providers are happy to also take an applicant’s personal income into consideration that on occasion enables a higher loan amount to be achieved.

Buy to let secured loan companies are generally also more flexible when it comes to the number of buy to let properties a borrower can have.  This can be especially useful for portfolio customers and the looking to build the number of buy to lets they own.

Although not common practice by all secured loan providers, there are some that will consider finance for properties that are not initially in a rentable condition that would not therefore usually qualify for a standard buy to let loan at the outset.  Bridge to let finance could hold the key for these clients where bridging finance can be offered initially and then converted to a buy to let mortgage once the property has been completed.

Secured loans, or sometimes referred to as homeowner loans or second charges, are fairy widespread in their availability however, what you will typically find is that the lenders offering these loans will be specific providers in this sector and not your main, and perhaps more recognised, names.  This however does not mean your lending is any more at risk nor that you will be treated in any different way as these providers are still regulated by the Financial Conduct Authority and have to abide by the same regulatory rules that your typical mortgage providers do.

It is also worthwhile pointing out that your obligations also remain the same, where your home or investment property when used as security is still at risk and can be repossessed should you not maintain your monthly payments.

With still such a wide variety of lenders in this sector and with each having their own criteria and ways of assessing affordability, it can appear a daunting experience when trying to find the right secured loan lender for your individual needs.  Our expert advisers are on hand to discuss your initial requirements, and where a secured loan is deemed a viable solution to your needs our secured loan contacts are well placed to source the right plan for you.

A secured loan is in many ways the same as a main mortgage aside of the fact that the provider is registering the loan as a second charge behind the main mortgage providers loan.  This is why this type of lending is also sometimes referred to as a second charge loan.

The very fact of the loan being registered second in line over the security will invariably mean that the rate offered will be higher than that offered by a main mortgage provider.  However as this sector of the market has become more popular, the increase in availability has in turn driven competition and as such made rates better than they have been historically when compared.

As these loans are treated very much in the same manner as a standard mortgage you also still get the choices of the same products.  Although not all are offered by each and every provider, schemes such as fixed rates, discounted or tracker variable rates are still available giving great choice.

Again, as with the main mortgage market, influencing factors will determine which rates are available to you such as, the type of loan ie residential or buy to let, the loan to value (LTV) ie the more you wish to borrow against the value of your home the higher the rate will typically be.  Your credit history will also be considered and therefore expect that those with a good credit rating to be offered better rates than those that have a history of bad credit.

A secured loan can be the right form of finance in the right circumstances and appreciating the rate can be an influencing factor of this bearing true, our experts are on hand to assist so why not contact us today to discuss your specific requirements.

How Just Mortgage Brokers Can Help You

If you have personal debt spread over more than one credit card, personal loan or other form of unsecured credit (for example, a store card) then it can sometimes make sense to consolidate some or all of your total debt into one, more manageable, loan. Here we will take a look at some of the options, and what you will need to take into account if you do decide to apply for a debt consolidation loan.

What is the difference between secured and unsecured lending?

Unsecured lending – such as credit cards and unsecured personal loans – are not secured against a tangible asset. Lenders take this risk into account when setting the interest rates they charge on these types of financial products.

Secured lending is set against a tangible asset as security; in the case of mortgages and secured loans, this asset is your home or any investment property you may own. Having the debt secured against the property means less risk to the lender: in the event that the borrower defaults on the debt repayments, the property can be repossessed and sold to repay the loan.

This means that secured loans usually offer lower interest rates than comparable unsecured lending, but this must be offset against the risk that if you fall behind with your payments, the property used as security could be repossessed.

What are the benefits of debt consolidation?

There can be a number of benefits in using secured loans for debt consolidation. The most obvious is a matter of cost. Unsecured lending interest rates are often several times higher than secured lending rates. It can mean the difference between paying, for example, 19.9% interest on a credit card debt, and 3.9% interest on a secured loan. Depending on the size of the debt, that can make a significant difference to the amount of interest you have to repay each month, and over the total time it takes you to pay off the balance. By lowering the amount of interest you have to pay on your debt, it also has the potential to allow you to pay it off over a shorter term.

Then there is the matter of convenience. If you have, say, two credit cards, a store card and an unsecured loan, then even if you have Direct Debits set up that is still four separate payments, potentially coming out of your account on four separate dates every month. If you do not have Direct Debits for all your payments, then you are potentially paying your monthly bills online, over the phone or even in a bank branch. With a secured loan, this is simplified into a single monthly Direct Debit.

If you have had credit problems in the past, a secured debt consolidation loan can also have advantages over unsecured lending; credit card and unsecured personal loan rates can be particularly high for borrowers with poor credit histories, but with secured lending the lender mitigates a degree of risk by having the loan secured against a property, allowing them to charge lower interest rates.

What are the disadvantages of using secured loans for debt consolidation?

Taking out a secured debt consolidation loan is an ideal solution for many people with unsecured debt, but it is not right in every situation, and is a decision that should only be taken after full consideration of the pros and cons.

The most major potential disadvantage is the risk of securing debt against your property – if your loan repayments fall into arrears, you could lose your home. That is why it is very important to look at your finances very carefully when considering a secured loan; you need to be sure that you can comfortably afford the repayments, and if necessary make provisions for what might happen if you were to lose your job or suffer serious illness or disability.

Secured loans are typically over a longer term – usually from 5 to 30 years – unlike unsecured loans, which typically have a term of up to five years. Repaying your debt over a longer term can make it more affordable, but you need to bear in mind that this means it also extends the term over which you are being charged interest and, in some cases, could even mean that you end up paying more interest in total.

If you are considering a debt consolidation loan, it is a good idea to work out how much you are currently paying in total each month in debt repayments, breaking it down into interest payments, and the amount you are actually paying off your debt. From there, you can work out how long it is likely to take you to repay everything. Once you have those figures, you can compare with secured loan options over various terms, and see whether a consolidation loan would be the best option for you.

As a final point, you need to remember that you can only get a secured loan if you have sufficient equity in your property. If you already have a mortgage with a high loan-to-value ratio, then this might prevent you from getting a secured loan, or limit the amount that you will be able to borrow.

How we can help you

If you are looking to carry out home improvements – whether that is a loft conversion, installing a new kitchen, renovating a bathroom or building a new conservatory – there are a number of ways to fund the project. You may be in a position to dip into savings, but if you do need to borrow for home improvements the principal options are either to remortgage or take out a further advance on an existing mortgage, or to get a secured or unsecured personal loan. Here we will look at some of the differences between the different types of loans.

Secured vs Unsecured loans for home improvement loans

Unsecured loans are not secured against a tangible asset (such as a property). This represents a higher risk to lenders in the event that the borrower defaults on the loan repayments; interest rates for unsecured loans are therefore usually notably higher than for an equivalent secured loan. Unsecured loans are also typically taken out for a shorter repayment term – normally between one and five years.

Secured loans, on the other hand, are secured by a legal charge typically against a property. That means that if you default on the loan payments, the property, which is for many their home, can be repossessed to repay the defaulted debt. This makes secured loans a potentially riskier option for the borrower, but it reduces the risk to the lender. As a result, secured loan interest rates are generally lower than for unsecured lending. Secured loans are often repaid over a longer term – usually terms of between 5 and 25 years are available.

Do I qualify for secured loans for home improvements?

The first factor to take into account if you are looking at taking out secured loans for home improvements is the amount of equity you have available in your property. Equity is simply the difference between the amount of borrowing you still have outstanding against your property, and the current value of your home. If, for example, your property is valued at £200,000 and your current outstanding mortgage balance is £140,000, then you have £60,000 of available equity. Many lenders limit their lending to a maximum of 75% loan-to-value (LTV), so in this case the maximum you could borrow would be £10,000 (taking your total secured borrowing to 75% of the property value). There may, however, be some lenders who offer secured lending to levels over 75% of the value of your home.

As with any type of borrowing, your credit history will have a bearing when your loan application is assessed. However, because the loan is secured against your property, you may find it easier to get a secured loan for home improvements with a poor credit history, than you would an equivalent unsecured personal loan. There are also a number of lenders on the market who specialise in secured lending for those who have had debt problems such as defaults, IVAs and even bankruptcies.

Other points to consider

If you are trying to decide between secured vs unsecured loans for home improvement loans, it is important to weigh up the pros and cons of each. The amount you want to borrow will have a bearing: lenders vary, but typically unsecured loans are available from around £1,000 to £25,000, while secured loans usually start from about £10,000 to an upper limit of around £2,500,000.

Secured loans are almost always cheaper than unsecured loans in terms of interest rates; however, this has to be balanced against the potential risk of securing more debt against your home. Always ensure that secured loan payments fall well within what you can afford to pay each month, and if necessary ensure you have provisions in place in the event of accident, sickness or unemployment affecting your ability to repay the loan.

Secured loans can be taken out over a longer term than unsecured loans, usually up to 30 years. While this can make the monthly loan repayments more affordable than a shorter-term loan, it also increases the period over which you will be charged interest, and this could actually mean you end up increasing the total cost of the loan over the entire term, in comparison with a shorter-term unsecured loan.

Whatever you are raising funds for, Just Mortgage Brokers has a team of specialist advisers with the skills and knowledge to source the right secured loan for you.

You’ll be allocated your own dedicated adviser who will guide you through the entire application process. As a firm of brokers, we have access to over 12,000 mortgage products. We consider each case individually and on its own merits, irrespective of credit history or status, meaning each and every customer can be confident of securing the most suitable deal available for their personal circumstances.

We’re confident you’ll be delighted with the individual service you receive, as we endeavour to find you the most suitable secured loan, tailored to your specific needs. For the right-secured loans on and off the high street, look no further than Just Mortgage Brokers. Contact us today for free no obligation impartial advice.

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