Compare Secured Loans

Often called homeowner loans or second charge mortgages these type of loans as the name implies are secured on your property such as your home to provide security to a lender in the event you are unable to repay the outstanding loan plus interest.

So your property is provided as security to a lender so you could lose your home or investment property if you do not keep up with repayments.

A mortgage is an example of a loan that is secured. The term “secured” loan is often used to refer to a second charge mortgage which is additional finance that sits behind a mortgage or first charge loan.

It can be confusing but the term “secured loan” relates to any borrowing where an asset such as property is used as security – this could be a a residential or investment property.

Second charge mortgages can be used for a variety of purposes depending on a lender’s criteria permissions.

Personal loans are unsecured loans which are not linked to an asset. Unsecured loans are offered on more stringent terms so typically the maximum amount you can borrow is less e.g. £25,000 and the term of the loan is restricted e.g. 5 to 7 years.

When assessing a personal loan and how much you can borrow a lender will look at your credit score by looking at your past track record from your credit history.

Examples where a secured loan could be used include; to raise finance for home improvements; funding a second property purchase such as a buy to let; paying for school fees, paying for a lifetime holiday or car purchase; business purposes (including startups); tax bills; securing other debts such as unsecured loans and credit cards which may be expensive to service.

The interest rate you pay if you are accepted will be determined by this scoring and other lender criteria.

For a secured loan a lender will require a charge on your property which means that in the event of defaulting on loan repayments your home may be repossessed. This is the case with a first or second charge on your property.

With this security a lender is more likely to offer more favourable terms for a longer term loan for a higher amount. So typically to borrow over £25,000 for more than 5 years a secured loan will be required.

With a secured loan a lender as well as looking at your credit rating will be required to assess affordability in ensuring that your incoming and outgoings means you can afford monthly repayments.

This will depend on your personal circumstances.

A secured loan may be a better option if time is of the essence and you need funds quickly. Typically a remortgage will take 4 to 6 weeks to complete dependent on the lender – a secured loan can be drawn down within 14 days.

A secured loan may be a cheaper option – With your current mortgage there may be charges if you apply for a new mortgage. You need to check the early redemption penalty clauses in your mortgage contract (ERCs). A new mortgage depending on the product you choose may have expensive valuation and legal fees which you have to pay up front.

It is important to check with your current mortgage lender that they are happy for a second charge to sit behind their mortgage – a good broker will check this for you.

This will vary based on your credit record. It will also be based on other factors such as the amount you wish to borrow relative to the property value.

If you have a poor credit record expect to pay higher rates of interest. The best rates where the loan to value (including any first charge Mortgage) is under 60% start from under 4% pa but what you will be offered will depend on your personal circumstances.

Types of rates offered will depend on the lender. Fixed rates, tracker rates and variable rates are available depending on your requirements.

It makes sense to use an independent broker who can assess whether this type of finance  is right for you. It may be that remortgaging is a better option for you.

Assuming you qualify a good broker will compare secured loans in the UK market using the best lenders who offer good rates and low charges. Some lenders offer deals with no legal fees and valuation fees which are refunded if the loan does not go ahead.

The turnaround time when applying for a second charge loan can be relatively quick. A 14 day application to fund draw-down is typically assuming there are no unexpected surprises.

A number of lenders for loans under £100,000 use automated valuation models to value properties using database modelling which can save you time and money.

Lender lawyers are also experienced and can ensure your application is done in a timely manner.

Some lenders provide an online process up to the point when a full offer is made when the paper offer and deed is sent in the post for a “wet signature”.

Again using a good experienced second charge broker can make the difference.

For a second charge mortgage you need to be an existing property owner with a mortgage.

Lenders have different criteria but many will consider customers with impaired credit profiles; self employed people with straightforward or complex income profiles; Contractors with short work or intermittent history records.

In many cases yes.

When you apply if this is important to you many second charge lenders provide products where there is no early redemption penalties (ERCs). E.g. if you are expecting a bonus or inheritance in 12 months, then raise this with your broker as a key requirement.

Yes.

Landlords often raise finance on buy to let properties through a second charge rather than remortgaging. There may be many good reasons for this including not wanting to move away from a good rate on a first charge mortgage, or where early redemption penalties apply, or where the 1st charge is on an interest only basis.

Landlords can use finance to help fund an onward purchase for a new investment property or to use funds to refurbish a property to increase the number of rooms or quality of the let to enhance rental yield prospects. Loans can be secured on a repayment of interest only basis.

Loan to values can be high with terms up to 35 years and UK coverage including England, Wales & Scotland. Maximum loan to values tend to be around 75% LTV with the option of tracker and fixed rates. Secured loans are also available to portfolio landlords.

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