Loans and Finance Explained
What is a Secured Loan and what are the risks?
A Secured Loan is a loan secured on the homeowners’ property very much in the same way as a Mortgage is. A Mortgage on a property is known as the “1st Charge” – a Secured Loan, therefore, becomes the “2nd Charge.” If a Secured Loan is never paid then obviously the Homeowners home is at risk. With the Mortgage company having the 1st charge they, therefore, reclaim their money first. A Secured Loan Lender would then follow as they are the 2nd charge. It is worth remembering that a Mortgage and Secured Loan Company would only ever repossess a property as a last resort.
A Secured Loan is ideal for Homeowners who are looking to raise finance by using their home as security. Traditionally a Secured Loan can provide Homeowners with a lower APR than that of an Unsecured Loan. Obviously, a Loan Lenders APR varies depending on the personal circumstances of the applicant. A Secured Loan can be used for a variety of purposes. The most common Secured Loan purposes are for Home Improvements and for Debt Consolidation.
Home Improvement Secured Loan
A loan that is secured on the applicants home addresses for the purpose of Home Improvements. The loan can be used for a new conservatory, renovations, extension or simply for double glazing. Almost any form of home improvements can be funded by a secured loan.
You may find that some secured loan lenders will require proof of what you will be using the funds for. This can be provided by simply gaining a written quote from someone who you are looking to have the work done by. Chances are a Home Improvement Secured Loan will actually increase the value of your property so it will be money well invested.
Debt Consolidation Loan
A loan that is secured on the applicants home addresses for the purpose of Debt Consolidation. The loan is generally used to consolidate (pay off) all existing credit by putting it into one secured loan and this generally reduces the monthly payments and therefore frees up more of your monthly income to use for more exciting purposes than clearing credit cards, store cards, loans or hire purchases! Sometimes the only way in which the monthly payments can be reduced is by taking the Secured Loan over a longer period than what the existing credit is currently on.
This can increase the amount in total that you will pay back but customers who take a Debt Consolidation Loan generally are more interested in the reduced monthly outgoing on credit.
A Secured Loan can be used for other purposes besides Debt Consolidation and Home Improvements. They can also be used for a Car, Holiday or Wedding. Generally Secured Loan lenders do not raise finance for Business. For a Business Loan, it may be a better route to contact your local Bank or Building Society.
Why would I want a Secured Loan instead of an Unsecured Loan?
A Secured Loan can normally be taken over a longer period than that of an unsecured personal loan. Unsecured Loans can normally only be taken over a maximum of 7 or 10 years. Some Secured Loan Lenders will allow the applicant to take the finance over a 30 year period and most will allow the finance to be spread over 25 years worth of payments. Obviously by taking the loan over a longer period reduces the monthly payment to the applicant – although you must remember the longer you take the loan over the more interest you will pay.
A Secured Loan amount can often be a lot higher than that of an unsecured personal loan. Secured Loans can be taken up to £100,000 – with some lenders even allowing applicants to borrow more. An unsecured loan lender will normally only lend up to £25,000 which sometimes just isn’t enough. We may surprise you with the amount you can actually borrow. Let Loan Machine do the hard work to find out.
If you have poor or adverse credit then the chances you have of getting an unsecured personal loan are very slim. Poor or adverse credit can include many things, CCJ’s (County Court Judgements), Defaults, Mortgage Arrears, IVA’s, VAR’s, Discharged Bankrupts and Missed Credit Payments. If you have any of these then your best route for gaining finance could well be via a Secured Loan. These don’t necessarily prevent you getting a Secured Loan – there are many lenders that will lend even if you have a combination of CCJs, Mortgage Arrears and Defaults. We may surprise you by finding a loan that you didn’t think you would be able to get. Let Loan Machine do the hard work.
Equity in your property will help you obtain a Secured Loan but that doesn’t mean you have to have equity to get a Secured Loan. Loan Machine has access to lenders that will lend finance above and beyond what your property is currently worth – although to do this you generally have to have a good credit rating. But what have you got to lose? We may surprise you by finding a loan that you didn’t think you would be able to get. Let Loan Machine do the hard work.
Self Employed people can often find it very difficult to raise finance. Secured Loan Lenders open the door to the Self Employed. They offer the ability to Self Certify your income. So even if you haven’t been self employed for long or you cannot prove your income via accounts then that does not mean you cannot get a loan. If you are Self Employed with bad credit or adverse credit you may think you cannot get a loan – this isn’t necessarily true. We may surprise you by finding a loan that you didn’t think you would be able to get. Let Loan Machine do the hard work.
Although all lenders will only lend responsibly to people who can afford it, Secured Loan Lenders generally are more flexible in their criteria. Some Secured Loan lenders will let you use Disability Living Allowance, Incapacity Benefit, Working Family Tax Credit as well as many other incomes to fund a loan application. We may surprise you by finding a loan that you didn’t think you would be able to get.