Secured Loans

The purpose of this lens will be to discuss the ways in which you can enable to get yourself a secured loan, so we will be looking at various things including credit scores, the criteria from the lenders and also the equity available in your property.

As the market for secured loans begins to open out with some levels of liquidity returning to the financial sector there are many consumers who looking to raise funds from their largest asset being their property. Many credit card companies and personal loan houses have pulled out of the market meaning that for some individuals particularly where they may not have a squeaky clean credit score that a secured loan is the only option.

There are lenders that want to transact business, all-be-it on their terms. So the days of finding a secured loan on a property with 10% equity or 90% loan to value (LTV) are long gone. Most lenders in the current climate will only consider an application where an individual has at least 20-30% equity in the property. That figure has increased over recent months, however it is unlikely we will see the speculative type 100% secured loans previously offered by some lenders.

It is important that you meet the repayments on a secured loan, as the lender has a claim over your property and your house may be at risk.

So, if you have improved your credit score as much as possible by getting rid of those dormant accounts, cleaned up the CCJ's etc and are now ready to make an application for a secured loan what do you need to do?

- Firstly you will need to make an application for a loan. There are many different providers out there, however it is probably sensible to use a master broker for this application as they will be able to provide access to a larger segment of the market than if you apply directly to the lender. The broker will be able to identify the type of lender which will be required for your loan based upon your financial circumstances, the equity in your property and the amount that you want to borrow. Please visit http://www.themoneyvine.co.uk which has access to many of the major lenders in the market.

- Secured lending can be a cheap way of raising funds if you have a requirement for a new car or a holiday, or for some renovations to your property, because the lender has the added comfort of security in a property this means that they are able to lend larger amounts of money than if it was an unsecured or personal loan. The lender will take a legal charge over the property, so if you have a mortgage on the property it is possible that you would have two legal charges over the premises. This means that if you are not able to meet the required monthly payments for either the mortgage or the secured loan the lender will legally be entitled to enforce their charge over the property which could lead to you losing your home. This is important to consider prior to entering into an agreement. However because the lender has the additional security normally the interest rates would be lower than if you were looking to borrow the money unsecured. In addition as the loan agreement will normally be taken over a longer term than an unsecured loan this will mean that the monthly payments would be less than a shorter term. However this means that the annual interest will be calculated over 7 years for example instead of 3. Typically secured loans can be funded over 5-25 years, and amounts that can be borrowed vary from between £2-5k up to £100k.

- There has been a recent resurgence in the number of secured loan agreements which are being accepted, as the market suffered significantly throughout the liquidity problems suffered by the lenders the main reason being that no-one was entirely sure where the housing market was going to drop to. As if it was to fall by a further 20% this could leave lots of home-owners in negative equity, which in turn would be a reason for a lender not to lend on a secured loan.

- Back to the process. When the lender has received the information around the type of facility which you are looking for, they will underwrite the proposal. This will normally involve a credit check generating both a score and also an understanding of your conduct with your existing creditors. Often if you are not currently up to date with your mortgage payments the lenders will consider this negatively as this is perceived to be the largest and therefore most important monthly payment to meet. If you meet the lenders criteria, then they will make you an offer for the loan which you require which will detail the proposal in terms of the amount of money that they are prepared to lend at which rate etc.

- If you are happy with the proposal then you will need to sign this and return it, this will then generate a request for a valuation of the property to take place, as the current value will need to be generated to ensure that the level of equity is as expected. If this meets the criteria then the lender will arrange via a solicitors firm to take a charge on your property.

Lenders conduct significant numbers of these agreements and therefore the process is quite straightforward. They will normally instruct a local surveyor, who will contact you to arrange a suitable time to attend.

1) Please check your credit score prior to the application as it is important to consider where your score puts you in the market which can have an effect on the availability of funding and the interest rate at which you will have funds available for you. Visit the link above.

2) Make sure that your valuation of your property is as accurate as it can be as the lender will soon suss it out if it's not!

3) Make sure that you are happy with all of the terms and conditions of the agreement prior to signing. If you are unsure about anything please contact the lender for more information.

4) Feel free to visit our site where we have access to some of the largest lenders in the country for secured loans.