Secured Loans

What is a secured loan?

A secured loan is a borrowing option that uses your home as “security” or “collateral”, meaning you must be a homeowner to qualify.

Using your home as security could boost the likelihood of approval and enable you to access larger loan sizes compared to alternative borrowing methods.

But, much like your first mortgage, missing repayments could put your home at risk of repossession. By making timely repayments on all your secured debts, you protect what matters most, your home.

How does a secured loan work?

Essentially, it is a second borrowing option on your property, which runs alongside your primary mortgage. So, you’ll have two loans tied to your home, each with its own monthly payment plan.

Now, the way it works is pretty similar to your first mortgage. You agree on a repayment schedule with your lender, and you stick to it until you’ve paid off the balance.

The good news is, this second loan won’t affect your main mortgage. So, you could keep your current deal while having the flexibility of extra funds. This is especially useful if you’ve got a great deal with your main mortgage lender, and you’re not keen on letting it go.

When might you need a secured loan?

A secured loan can be beneficial when traditional borrowing options are not possible. For example, if you need extra funds but your primary mortgage lender turns you down for a further advance, a secured loan could be a good alternative.

It’s especially useful when:

• Traditional options like further advances or remortgages are unavailable.
• Other funding options won’t allow you to raise the amount you need.
• Remortgaging risks losing favourable terms or incurring hefty early repayment charges.

In these situations, secured finance could be a good fit. But if you’re unsure, it’s worth chatting with an advisor for guidance.

What can you use secured loans for?

It is a flexible funding solution, as you could use it for any legal purpose. Most people use this option to help them consolidate debts or fund home improvements. But you could also use it to:

• Pay a tax bill;
• Make your dream wedding happen;
• Cover private school fees;
• And many more.

If you’re thinking about consolidating your existing debt, remember that this could stretch out the repayment period and increase the total amount you’ll end up paying.

Are secured loans easy to get?

In some cases, secured loans can be easier to get than other types of borrowing, like unsecured personal loans. Because these loans are secured against your home, lenders have an added layer of confidence when reviewing your application.

This means if you’ve got a complex financial history or less-than-perfect credit score you might still be eligible for a secured loan, where you may have been turned down elsewhere.

Of course, approval isn’t guaranteed. Lenders will still assess things like your income, existing credit commitments, and the equity available in your property. However, because the loan is tied to your home, they’re often more flexible with their criteria compared to other borrowing options.

So, while it depends on your individual situation, secured loans may offer a more accessible path to funding, particularly when traditional options fall short.

What are the benefits of secured loans?

The big benefit is access to funding, which could make your plans a reality if they were out of reach previously. But there are more advantages:

1. Larger loan sizes: When you borrow against your property, lenders are often more relaxed, since they could take your property if you don’t make repayments. This means you might be able to finance bigger plans compared to other types of loans.
2. Longer repayment terms: Secured lenders could offer longer repayment periods, allowing you to spread out payments over a longer term and lower your monthly costs.
3. Easier approval: Because you’re offering your property as security, getting approved for a secured loan could be easier. So, if you’ve got a complex financial history, this option might be an easier path to approval.

What are the risks of a secured loan?

Like with any financial decision, there are risks to weigh up before deciding on a solution. While they could be a useful option for funding your plans, they do come with their own set of risks, including:

1. Risk of property repossession: If you consistently miss repayments, your home could be at risk of being repossessed since the loan is tied to your property. However, repossession is typically a last resort.
2. Long-term repayment implications: Although securing a longer repayment term may seem appealing, it’s essential to recognise that this could result in higher overall repayments as you will accrue interest for a longer period.
3. Impact on credit score: Missing repayments on any loan can negatively affect your credit score, potentially impacting your ability to secure other types of financing in the future.
4. Higher fees: These loans often carry higher fees due to the specialist nature of this type of lending. So, it’s important to take this into account before moving forward.

How do I apply for a secured loan?

The application process for a secured loan is simple when you have the right support. Here’s how it works:

• Check your eligibility: To qualify, you’ll need to be a homeowner and be able to afford the repayments.
• Let us handle the work: We’ll refer you to a trusted secured loan broker who can compare deals from a panel of lenders and find the right fit for your circumstances.
• Gather your documents: Lenders typically need proof of income, recent bank statements, mortgage details, and information about any existing debts.
• Property valuation and lender checks: The lender may arrange a valuation and carry out affordability and credit checks before issuing an offer.
• Funds release: Once all of the above is completed, the funds are released.

If you find yourself in need of a secured loan, don’t hesitate to reach out to our team. We’ll connect you with our trusted referral partner who may be able to help you access the funding you need.

PLEASE NOTE: YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.