When remortgaging or a further advance simply won’t work for you, a secured loan could be the answer to your financial needs.
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Subject to your personal circumstances, secured loan key features include:
- Low rates starting from 7.54%
- Borrow £10k to £2.5m
- LTV up to 100%
- Flexible lending
- Whole of market
- Independent from existing mortgage
- All types of credit history considered
- Deals can be turned around in 2 weeks
- Residential, buy-to-let and commercial property accepted
- Loan terms from 1 year with low or no early repayment charges
- Free valuation (subject to circumstances)
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
What is a secured loan?
The name ‘secured loan’ describes this form of finance perfectly – it is a loan which is secured against your main residence, buy-to-let properties or commercial buildings in second charge behind your main mortgage and does not affect your current mortgage or the rate you maybe on.
How could a secured loan help you?
Secured loans can be the solution to a number of funding problems and are typically used to:
Borrow without affecting your current mortgage rate or being charged ERCs
Obtain finance quicker than remortgaging
If you have adverse credit and need to borrow
Release funds for another property purchase or home improvements
Consolidate existing unsecured debt
Any other legal purpose
Why use Pure Property Finance as your secured loan broker?
As specialist finance brokers with years of experience, our team have built up strong relationships with lenders. This means we have the knowledge to match you up with the lender that best suits your financial needs. We’re known for our expertise in arranging property finance deals, plus, we’ve access to broker-only deals which aren’t available on the high-street.
Our Secured Loans
Second charge mortgages
When remortgaging or a further advance simply won’t work for you, a second charge mortgage could be the answer to your financial needs. Pure Property Finance can help.
Want to free up the equity in your Buy-to-Let property to finance another purchase or project? Then Pure Property Finance can help.
What is a secured loan?
A secured loan, much like the name suggests, is a loan that is ‘secured’ against an asset. This could be your main residence, or it could be a buy-to-let or commercial property.
Secured loans can also be known as a second charge mortgage, a secured homeowner loan, or even simply, a homeowner loan.
If you’re looking to borrow a large sum of money and are struggling to get a personal loan, a secured loan might be a viable option for you.
This type of finance is completely separate from your first charge mortgage, so your rates won’t be affected, nor will you have to risk incurring any ERCs (early repayment charges).
A secured loan is also a good option for customers with adverse credit – this can include heavy mortgage arrears, missed credit card payments, CCJs and debt management plans.
As we can give same day decisions, and have deals turned around in as little as 2 weeks, this type of finance is ideal for those looking to secure funds quickly.
Secured loans can be used for a variety of purposes – the most common ones being debt consolidation or making home improvements, but can also be used for:
- Paying for a wedding
- Funding a holiday
- Help financing a car
- Any other legal endeavour
As you’re using a valuable asset as collateral, this reduces the risk for the lender, meaning you can benefit from borrowing a large loan amount with a lower interest rate.
Whilst you may have access to a more affordable rate with less interest, if you continue to struggle up with the repayments, your home is at risk of being repossessed.
To find out if this borrowing option is right for you, get in touch with us here at Pure Property Finance, where we have the knowledge and relationships with lenders to find you the best secured loan rates available.
How does a secured loan work?
It works much like a personal loan does, is the short answer. Once approved, you will have to make a monthly repayment for the agreed term until the debt is fully paid off.
How a secured loan differs from a personal loan is that because you’re using your home, or another valuable asset as security, this allows the lenders to offer a much favourable interest rate.
Here at Pure Property Finance, one of our experienced advisors will ask a few questions about your individual circumstances, walk you through the process and find the solution that’s right for you – because, unlike other brokers, we have access to the whole market of lenders, so you can be sure we find the best deal available.
What do I need for a secured loan?
First and foremost, you’re going to need an asset to ‘secure’ the loan against – this will usually be a residence, or other asset you’re comfortable with using as collateral.
You are also going to need to find a suitable specialist loan provider. Specialist finance brokers have great relationships with the best lenders, ensuring you have access to the best deals. We, personally, enjoy a whole-of-market approach to lenders, meaning we have a wide spectrum of lenders to work with and are not tied down by any commitments.
Be wary of using certain comparison sites when looking for the best secured loan option, as some lenders will perform a full credit check before they offer you a quote – this means that on your credit file, it can look like you have seemingly applied for the secured loan itself.
If this happens multiple times, it can in fact harm your overall credit rating! This is why we always begin applications with a ‘soft search’, to make sure any shopping around you’re doing before committing isn’t doing any harm to your credit score, which can affect future borrowing options.
Once you’ve found a deal and broker you feel comfortable with, they will help you build an application to propose to lenders. This will include some details on your personal lending situation and then some documentation to back it up with, which will contain a combination of the following:
- Proof of your identity – this will be in the form of a passport or driver’s licence
- Proof of your income – this could be a bank statement and payslip, Tax calculations and Overviews or details from your accountant
- Proof of your employment status – this could be a copy of your payslip, Tax calculations and Overviews or again, details from your accountant
- Proof of your address – this could be either a utility bill or a previous mortgage bill
While certain lenders will require you to get this documentation over by direct mail, meaning you would have to get them scanned, printed and sent via post, most lenders accept digital copies of this information, both for your overall convenience and to speed up the process.
What is better: a secured or unsecured loan?
A secured loan is a form of lending backed by collateral – usually a house, but can also be other types of material assets. As this type of loan is ‘secured’ against an asset, this allows the lender to advance higher amounts and with lower interest rates.
Unsecured lending does not require any collateral and is instead based on the individual’s credit score and history – these types of loans can also be called personal loans, with credit cards also being an example.
Unsecured loans are advanced by banks or other lenders, with an agreement to make regular payments until the money is paid back in full. Your credit history can be affected if a payment is late or missed, and the lender can go to court to reclaim their money.
The main differences between secured and unsecured lending are the security aspects of backing a loan against your home or other asset, the amount the lender is willing to borrow, the interest rates available and your credit history.
Secured Loans (positives)
- The amount of money you can borrow is much larger, due to the added security for the lender
- You will tend to get lower interest rates than you would with an unsecured loan
- If you have a poor credit history, you can still be considered
- Longer repayment periods allowing you to spread out your lending over time
Secured Loans (negatives)
- As the loan is secured against your home or other asset, this could be repossessed if repayments aren’t made
- Though your repayments may be lower, if your secured loan deal is spread over too long of a time, you could end up paying more overall
- If the interest rates are variable, your monthly repayments could end up going up
- You could end up paying over the odds for set-up costs and additional fees not included in the APRC (annual percentage rate of charge).
Unsecured Loans (positives)
- There is flexibility in choosing how long you want to make the repayments over
- In some cases, it might be easier to pay off an unsecured loan early and with less fees
- You aren’t risking any collateral should you noy be able to make early repayment charges – though you should remember that missed payments can still affect your overall credit rating
- The application process is often faster and more simple
Unsecured Loans (negatives)
- The amount you are allowed to borrow is much lower
- Due to the greater risk for the lender, the rates and monthly payments for unsecured loans can be much higher
- Though your home may not be at risk, failure to make repayments can result in legal action and a poorer credit file
- Your application being accepted or not depends heavily on your credit history
How much can I borrow on a secured loan?
The amount of money you can borrow does not depend simply on your income. Unlike traditional mortgages, whereby a lender would typically agree on multiples of your gross salary – often around 3 to 4 times your pay – secured loans are underwritten differently.
How much you can borrow is determined by carrying out an affordability calculation, looking at how much equity you have left in your home, and to a certain extent, your credit rating. Lenders will look at your net income, as well as your outgoings. They will then work out how much disposable income you’re left with after seeing to your monthly outgoings, so it can be properly determined if you’re able to repay.
If you’re self-employed, the process is fairly similar, taking into account your outgoings and income before coming to a decision. Again, using an affordability-based calculation as opposed to simply looking at multiples of your income, means there’s a chance you can borrow a higher amount.
There are plenty of specialist loan brokers, ourselves included, who will look at your lending options should you have a poor credit rating. It should be noted, the amount you can borrow and your interest rate will be improved with a better credit profile.
We broker loans from £10,000 up to £2.5 million. In a market that can offer such drastically different rates, having access to the entire market of lenders (backed by our industry expertise in building applications) really makes a difference when finding you the best deal available.
How long does it take to get a secured loan?
A secured loan can usually be turned around in 2 to 4 weeks, if not sooner. Once approved, the funds can often be transferred in a matter of days, even hours.
Depending on the lender, some secured loans can be processed quicker, though the reason secured loans take longer than personal ones in general is because of the additional paperwork and checks needed.
Checks may include a valuation, which would mean arranging a surveyor to come and look at the property, in order to produce an accurate report to the lender. The application can be delayed further if there are any complications or further causes for analysis.
You will also need to provide various documentation along with your application – this can vary depending on the lender, individual and loan circumstances.
An advantage of using a financial brokerage like Pure Property Finance is we can help you compile the application and liaise with the lenders directly, streamlining the whole process.
Will a secured loan affect my mortgage?
One of the main reasons people take out a secured loan or ‘second charge mortgage’, is that it is separate from their first charge mortgage. This is advantageous to the other option of remortgaging, as you may have preferable rates on your original mortgage that you don’t want to change, plus, you also do not have incur any ERCs (or early repayment charges).
Getting a second-charge mortgage is also generally faster than remortgaging, which can take from 4 to 8 weeks, and is good for those who have any adverse credit that is limiting their options.
Securing a loan against your home won’t generally affect your first charge mortgage, unless you make the decision to move. If you sell your house with existing credit left on it from the loan, money you receive from the sale will always have to prioritise paying off the mortgage, leaving any outstanding debts incurred second in line.
There can be options to combine your second charge debt alongside a remortgage deal, should you need to borrow more funds. You have to take into account that your eligibility for having one may be reduced as a result of the other. Speaking to your mortgage lender, a broker or financial advisor will help you determine if this is a feasible option.
Having a secured loan doesn’t mean you won’t be able to remortgage further down the line. It may even be a favourable option if your first charge mortgage terms have come to an end and you’ve switched to a standard variable rate.
There is the option to clear the secured loan by borrowing more money through remortgaging. This is certainly a way to remove any risks you may be worried about of repossession and the risk of default. How much money you’re bringing in versus how much you’re spending, along with the value of your property and the equity in it, will all affect how much you can borrow.
Clearing the loan via remortgaging is a way to consolidate your finances, so that you’re only paying one payment to a single lender each month. You do have to weigh up the affordability of this option, as your monthly repayment options are going to be larger than they were before you decided to remortgage.
The other option is to continue keeping the first and second charge mortgages separate. By doing this, a lot of lenders will be less willing to remortgage with the loan attached to it, and a result, it may affect the future interest rate of the new mortgage.
If you’re looking for advice on homeowner loans and how they may or may not affect your first charge mortgages, please do not hesitate to get in touch with us. We’ll always endeavour to give you our expert opinion and your best (obligation-free) options going forward.