A Guide to Secured Loans
A secured loan is any loan that requires the borrower to provide the lender with some form of security. In the case of secured loans the security will be the borrower’s property, regardless of whether it is mortgages or owned outright. Loans secured against property that is already mortgaged are known as second charges, whereas loans secured against a property owned outright with no existing mortgage in place are known as first charges. See below for a quick guide to secured loans.
STEP 1 - WHICH LOAN?
Secured home-owner loans are available in varying amounts and for many different purposes, including debt consolidation. The amount available usually ranges from £3,000 to £50,000, although some lenders will consider lending up to £100,000. The amount borrowed is repaid monthly over a term agreed at the outset, which will usually range between three years and twenty five years. You may be charged a penalty if you repay your loan earlier than agreed, and you should check each lender’s individual policy with regards to this.
Lenders charge interest on the amount you borrow, which is referred to as the Annual Percentage Rate (A.P.R). The amount you can borrow, the term available and the A.P.R will all depend upon the equity you have in your property, the lender's view of your ability to repay the loan and your personal circumstances, for example any adverse credit. Subject to your circumstances, you may be able to borrow up to 125% of the property value. The A.P.Rs quoted by the lender will usually be typical rates, and these act as a guide only as the exact rate offered will be on an individual basis. As a general rule, it is advisable to compare the A.P.Rs of different loans, as this is a good way to determine how competitive they are.
Generally, secured loans are much easier to obtain than unsecured loans. This is because the lender has the added benefit of security, which provides protection in the event of a customer's inability to repay. This also means that persons who are self-employed, have recently changed jobs or who have adverse credit can take out a loan. They are also useful for larger amounts or where the applicant requires a longer repayment period.
STEP 2 - HOW DO I APPLY?
Lending institutions offer you the option of taking a secured loan via their branch network, over the telephone, via a written application or online through their website. Initial assessment of your application can be made quickly, however loans under £25,000 are regulated, and a 7 day consideration period will be given to allow time for you to assess the implications of the credit agreement, and to ensure that you are fully aware of all the terms and conditions. When assessing your application the lender will consider your income and financial commitments to determine whether you can afford to take on and repay additional finance. They will look at your past credit history and take into consideration any adverse credit such as mortgage arrears, defaults or county court judgements. All lenders insist that where an applicant is married, both parties should be named on the application form.
Lenders frequently use credit scoring facilities and credit reference agencies to assess your suitability. Credit scoring assesses your personal circumstances and statistics to determine which broad category of borrower you fit in to. Credit reference agencies provide a detailed analysis of your financial position as they hold information relating to your credit history, any adverse credit and any existing commitments. They also provide address and electoral roll information. If you are refused a loan or wish to make enquiries concerning your own credit file you can apply to the credit reference agencies for a copy of your credit file. This service is subject to a small fee.
Equifax PLC
You
can also view your credit file with Equifax for only £12.50. They also offer
easy to use online facilities to dispute errors in your credit file instantly. To
find out more click here.
Credit File Advice Centre
PO Box 1140
Bradford
BD1 5US
Looking for a loan but been refused? Let out friendly financial team do the work for you and get the best rates possible. It’s easy - we are here to help. Give our financial helpdesk a call on 0870 111 0001... no obligation just the best advice. Lines are open from 9am to 8pm Monday to Thursday, Friday 9am to 5.30pm and Saturday 10am to 4pm.
STEP 3 - HOW AM I PROTECTED?
A secured loan is subject to The Consumer Credit Act 1974. The Act contains strict regulations about how money is lent and covers loans up to a value of £25,000. Loans for sums greater than £25,000 are unregulated. When taking out a secured loan you will be asked to sign a credit agreement, which should be read carefully as the terms are binding. For regulated loans of under £25,000 the lender must provide a consideration period of 7 days. Lenders offer insurance policies and payment protection schemes to cover your monthly repayments in the event of accident, sickness, unemployment and death (conditions apply). Cover does vary between lenders, as does the cost, therefore you should check individual policies for what is included, and just as importantly, what is excluded.
If you are considering protecting your repayments in the event of accident, sickness, unemployment or death, why not browse our Mortgage Protection and Income Protection finders.
If you do experience difficulties with your repayments, seek advice from your lender as soon as you can. Remember, your property acts as security for your loan and it is therefore at risk in the event of any repayment problems. The earlier you seek help, the more sympathetic your lender is likely to be. You can also seek help from voluntary organisations such as the Citizens Advice Bureau.
YOU CAN APPLY FOR A LOAN WITHOUT LEAVING THIS SITE!
Moneysupermarket.com provides you with the facility to apply online for your secured loan. Providing the product has a red apply icon, you can submit your application without leaving our site. This will ultimately save you time, as it means you won’t need to contact service providers direct.
When you apply through moneysupermarket.com you will either complete a short application form via our secure server, be re-directed to the service provider's website to enable you to follow their own application process or you will be asked to submit your details for a member of our Sales Support Team to contact you. Once your application has been submitted to us, either moneysupermarket or the service provider will send you an e-mail acknowledging your application. If you completed our application form, it will be passed to your chosen provider in order that they may process it.
If for any reason your application is declined, moneysupermarket may be able to direct your application to a provider who can help. We have a Support Team who can be contacted by telephone should you require any further assistance along the way.
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.MISSING PAYMENTS WILL HAVE SEVERE CONSEQUENCES AND MAY MAKE OBTAINING CREDIT MORE DIFFICULT IN THE FUTURE.