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About
secured personal loans
A
secured personal loan is any
personal 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
mortgaged 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 £10,000 to £100,000, although some lenders
will consider lending up to £150,000. 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 personal 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.
Looking for a loan but been refused?
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 personal 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 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.
Secured loan
lenders or brokers. The following companies deal with secured personal
loans and second charge loans.
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