Secured Loans Advice

Secured loans advice

Our current financial climate has made it very difficult to borrow money. The banks are far less likely to lend finance without any collateral to secure it against which is why more and more people are opting for a secured loan.

This is a loan secured by a second charge behind your first charge, that being your primary mortgage. 

What is a secured loan?

This is a loan in which the debt is secured against collateral such as a house as a second charge behind the first charge mortgage. Sometimes a secured loan is also known as a second charge mortgage or homeowner loan.

What are the benefits of a secured loan?

  • As a secured loan is secured against an asset, they are usually easier to obtain.
  • You can borrow more money using a secured loan. At Freedom Finance, you can borrow between £3,000 and £2,000,000.
  • With a secured loan, you can often borrow over a longer period of time than an unsecured loan.

How can I get a secured loan?

At Freedom Finance, you can check your eligibility for a secured loan without impacting your credit rating. We can search a variety of lenders to find a secured loan that suits your individual circumstances. A fully qualified adviser will take you through the process step-by-step so that we can make sure you find the right secured loan for you. To check your eligibility for a secured loan, click here.

What can I use a secured loan for?

Secured loans can be used for most legal purposes. Due to the larger mortgage loan amounts and longer repayment terms available popular loan purposes can be home improvement, home extensions and debt consolidation.

Will I be eligible for a secured loan if my credit rating is poor?

With a secured loan, the lender is more likely to get the money back as if payments default, they can repossess the house. As a result of this, lenders are, on the whole, more likely to offer a secured loan rather than an unsecured loan to a candidate with poor credit rating.

For helpful hints on how to improve your credit rating you can, see our guide here.

Can I borrow a higher amount than I could with an unsecured loan?

Yes. Unsecured loans usually cap the borrowing at £25,000 but a secured loan may be taken for up to a million pounds plus. Because the mortgage is secured, lenders also offer a longer repayment period, but similarly to personal loans, the longer the period the more overall interest you will pay, although the monthly payments will be less. A secured loan may be borrowed for up to 25 – 30 years whereas a personal loan is usually repaid within 5 years.

Are the interest rates higher with a secured loan?

They can be higher but in fact they are often lower than a personal loan because the loan is secured against an asset such as a home and therefore the lender is more likely to recoup their money via repossession.

The length and amount of the secured loan will also influence the rate, as well as the amount of equity in the home

Equity is the difference between the current value of the home and the remaining mortgage left to pay.

What are some of the disadvantages of a secured loan?

The primary risk of a secured loan is that as a last resort your house may be repossessed if you fail to keep up with repayments. Because of this, you must ensure you can afford the monthly repayments now and in the future. A further disadvantage is that you may incur early repayment charges and administrative costs if you want to pay off the loan early.

Your Freedom Finance mortgage adviser will assess your attitude to risk, ensure that the product recommended is suitable and provide you with information about the costs related to your mortgage.

To find out more, view our Monthly Budget Guide.

Secured Loans FAQs

How long will it take to process a secured loan?

Applying to take out a secured loan against a property can require large amounts of paperwork. This can extend the time it takes to receive the money from the loan, however, it can still be completed relatively quickly if you can provide all the information accurately and efficiently.

After a secured loan application has been made, you will normally receive a quotation that’s subject to validation and confirmation. If you decide to take the next step, then your credit report will be assessed.

You may be asked to provide evidence of your income such as payslips or accounts. If the loan you want is secured against your house, rather than another asset such as your car, the lender will want to confirm that the amount of equity you have in your home covers the amount of the loan.

To do this, the house must be formally valued, and confirmation of your existing mortgage debt must be provided. The lender will also need to determine if any other party has legal hold over the property, and to attach their own claim to the deeds.

This process varies from lender to lender but can take several weeks. You could ask the potential secured loan lender for a time estimate at the point of application.

I have taken out a secured loan, but I’m moving – will this be a problem?

If you’ve taken out a loan on your house but you’re moving, you might be worried that you can’t put it up for sale until the loan is repaid.

Although the secured loan doesn’t have to be fully paid off, you will need to agree to repay it when you move. There are two options, the first option could be to see if you have enough money from the house sale to repay the debt in one go. The second option is to transfer the loan to the next house. It’s important to note the lender may charge you a fee for this and that not all lenders will allow it.

It’s also worth bearing in mind that taking out a personal loan could affect your mortgage application and result in you being charged higher interest rates. If you are unsure of the next steps, you may want to seek some independent financial advice.

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Whether you're planning on some home improvements, replacing your car or simply getting your finances in order, a loan from Freedom Finance could be more affordable than you think. Use our calculator above to find the ideal loan for you. All quotations given are for illustrative purposes only. Credit subject to status. The rate you are offered will depend on your personal circumstances, credit assessment procedures and other related factors.