Category: Secured Loans

A competitive debt consolidation loan has the potential to save an individual with multiple debts, time, money and hassle. Particularly if their existing debts attach elevated rates of interest and excessive borrowing costs, consolidation can represent a real lifeline.

But which of the two main options available, secured and unsecured consolidation loans, is the better choice? More importantly, in what circumstances would it be advisable to consider using a consolidation loan to repay debt?

What Kinds of Debt Can Be Consolidated?

Consolidation loans can be used to pay off almost all types of loans and outgoings:

• Overdrafts from banks
• Outstanding credit card debts
• Arrears on personal loans
• Payday loan balances
• Store cards and credit facilities

Where multiple debts are making it difficult to keep up with your monthly repayments, a consolidation loan can simplify your financial life and reduce your overall outgoings.

Do Debt Consolidation Loans Result in Negative Credit?

The answer depends entirely on the nature of the credit facility you take out. There are some specialist consolidation loans that can adversely impact the credit score of the applicant. Simply by applying for a debt consolidation loan, your credit history may be impacted.

However, there are also various specialist secured consolidation loans that have no impact whatsoever on the applicant’s credit history. It is therefore important to carefully discuss the various options available with your broker, before submitting your application.

How Do Secured Debt Consolidation Loans Work?

A secured debt consolidation loan works in a similar way to a mortgage, in that it is secured against your home, or other qualifying assets. As the loan is secured, it is considered a lower-risk facility on the part of the lender, ultimately resulting in more competitive rates of interest and flexible repayment terms.

In addition, secured debt consolidation loans are typically available in much higher sums than unsecured consolidation loans.

The major risk attached to a secured loan is that of forfeiting your property if you fail to keep up with your agreed repayments.

How Do Unsecured Debt Consolidation Loans Work?

An unsecured debt consolidation loan is issued purely on the basis of merit, with no security required. This means credit checks are done that include your earnings, employment status and general financial position.

The benefit of an unsecured loan is that you do not need security, nor are you at risk of losing your home if you fall behind your repayments.

However, unsecured debt consolidation loans are considered higher risk for the lender, therefore are not typically issued in sums of more than £15,000 and may attach less competitive rates of interest.

Which Debt Consolidation Loan is best?

Choosing the most appropriate debt consolidation product means first discussing all available options with your broker. Suitability will be determined by how much you need to borrow, your preferred repayment period, your financial status, your credit history and whether you have qualifying assets available.

After which, a complete market comparison can be performed on your behalf, in order to ensure you get the best possible deal.

For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.

An unsecured loan can be a versatile and conveniently accessible financial tool for short-term borrowing requirements; however, unsecured loans are typically only available for relatively small sums and are repaid using regular monthly payments, over an agreed timescale.

With secured lending, significantly greater sums are often available and for repayment over a much longer period. The most common example of a secured loan is a mortgage, wherein the applicant borrows to buy a home and repays the balance over 10 to 35 years.

Secured lending is the provision of security (aka collateral) by the applicant, which is used as an insurance policy to repay the loan.  In the event that the loan is not repaid in full, the lender has the legal right to take ownership of the security, sell it and use the proceeds to recoup their losses.

A secured loan therefore brings the risk of forfeiting assets but can nonetheless be beneficial in a variety of ways.

What Are the Benefits of Secured Lending?

The main benefits of secured lending are the option of borrowing a relatively high sum of money and they are available for most legal purposes. Provided sufficient equity is available in your property to cover the loan amount should the loan default, you have a high chance of success.

Even poor credit and lack of income (bridging loans only) may still be considered.

In addition, the reported average completion time for a secured loan at the end of 2020 was just 13 days. Repayment options are also flexible, allowing borrowers to repay the loan over their preferred period dependent on affordability, anything from a few months (for a bridging loans) to 40 years.

With competition among UK lenders at an all-time high, typical interest rates for secured loans are at the most competitive that they have ever been.

When is a Secured Loan the Right Option?

As for when a secured loan represents the ideal option, there are technically no legal limitations to where and how the funds can be used. Therefore, a secured loan could be the perfect option in any instance where the following is required:

• Significant loan amounts – Secured lenders offer loans starting from £10,000 upwards, making secured loans ideal when you need to borrow a significant sum of money for a major purchase, project, or investment.
• Long term repayment – Being able to spread out the repayments on a secured loan over several years or decades provides the borrower with access to affordable monthly repayments.
• Poor credit borrowing – As secured loans are typically issued primarily on the basis of security, it is possible to qualify for a competitive deal with a poor credit history or no credit history.
• Business loans – As the vast majority of businesses have a variety of valuable assets at their disposal, secured loans can be used as competitive and versatile business loans for a long list of purposes.

Provided you can prove that you can comfortably afford the repayments on your loan, secured lending could enable you to access the funds you need at a competitive rate of interest.

For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.

Homeowners across the UK routinely turn to banks and specialist lenders for help with major home improvement projects.

One of the most flexible and versatile products available is a secured second charge home improvement loan, which can cover the costs of most types of major home improvements, renovations, and extensions.

What is a Secured Second Charge Home Improvement Loan?

As the name suggests, a secured second charge home improvement loan is a specialist financial product provided specifically for home improvement purposes. As a secured loan, the funds issued are taken out against an asset of suitable value – in this instance the home of the borrower.

The amount you can borrow will be determined by how much equity you have in your home – i.e., how much of your mortgage you have so far paid off. A loan is issued with the property used as security, after which the money is repaid over a series of monthly payments at an agreed rate of interest.

A secured second charge home improvement loan can be issued as an extension on your existing mortgage by your current lender. Alternatively, it can be taken out as a separate loan entirely with the lender of your choosing.

How is an Unsecured Home Improvement Loan Different?

Unsecured home improvement loans are those that are issued based on the applicant’s strong financial position and credit history. No security (i.e., property or assets) are required, as eligibility is determined purely by way of merit.

While unsecured lending may eliminate the risk of forfeiting your assets in the case of non-payment, it nonetheless has its limitations. Unsecured loans are considered higher risk on the part of the lender, which means you will not be able to borrow as much and may face much higher overall borrowing costs.

Qualifying for an unsecured home improvement loan is also impossible in the absence of an excellent credit history and proof of a strong current financial status.

How Much Can I Borrow on a Home Improvement Loan?

There are technically no limitations to how much you can borrow, as the maximum loan amount will be based on the equity available in your property. Secured loans typically start from around £25,000 upwards and are repaid over the course of an agreed number of years.

Your financial status and credit history may also be considered by the lender, when determining how much you can borrow.

What Can I Use a Home Improvement Loan For?

Most home improvement loans can be used for any major property improvement or extension project. Few lenders impose formal restrictions on how the funds can be allocated, so you are free to use the loan for any purpose you wish.

Some of the most common uses for secured home improvement loans are as follows:

• Extensions to create additional living spaces.
• Landscaping and major garden renovations.
• New kitchen and bathroom installations.
• Installation of conservatories or outdoor summer houses.
• Swimming pool planning and construction.

By spreading the costs of the project over several years, the major home improvement project you have been dreaming about could be more affordable than you think.

For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.

On one hand, it is true to say that taking on any form of debt while already struggling with your monthly outgoings is not a good idea. Attempting to solve debt by taking on more debt is usually counterproductive, though there is one exception to the rule.

Debt consolidation involves using one larger loan to pay off multiple debts, leaving the individual in question with just one monthly repayment it is calculated that they can afford. Replacing numerous debts with a single loan at a competitive rate of interest can also significantly reduce the individual’s overall debt level and outgoings, however, consolidating debts with a secured loan is not without its risks, all of which should be discussed in full with an established broker before applying.

Taking out a secured loan to consolidate debts effectively means converting a series of unsecured debts into one larger secured debt. This immediately brings the benefits and risks associated with secured borrowing into the equation, such as the following:

Benefits

• A secured loan can often be provided at a significantly lower rate of interest, as they are considered lower-risk products on the part of the lender.
• Taking out a secured loan provides the opportunity to repay the balance over 5, 10, 15 years or even longer, allowing for comprehensively affordable monthly repayments.
• Specialist secured loans for debt consolidation do not adversely impact the credit history of the applicant.
• Provided you have sufficient security (assets) available to cover the total sum of the loan, you have a strong possibility of success with your applicaton.

Risks

• Secured debt consolidation loans are typically issued against the home of the applicant, which may subsequently be repossessed if the loan is not repaid as agreed.
• Variable interest rates are occasionally used on longer-term secured loans, which means monthly outgoing could increase (or decrease) in the future.
• You cannot qualify for a secured debt consolidation loan of any kind if you do not have qualifying assets to secure the loan against.

How Can I Ensure I Get the Best Possible Deal?

Before applying for a secured debt consolidation loan, it is essential to ask yourself three important questions:

1. Will the loan clear all of my debts and therefore put me in a much better financial position?
2. Can I comfortably afford the repayments on the loan without any issues?
3. Am I sure I will be able to cope if the interest rate on my loan increases in the future?

If after considering the pros and cons you decide to go ahead with a debt consolidation loan application, ensuring you get the best possible deal means working with an established independent broker.

Your broker will conduct a whole-of-market comparison on your behalf, incorporating countless specialist lenders that do not work directly with the public. This comparison will be provided free of charge, with no fees and commissions payable for the services offered.

For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.

Homeowners planning major alterations or improvements to their properties have a variety of funding options to choose from. One of which is a second charge secured loan which is effectively a second mortgage secured against your property and usually for a smaller sum than the first charge.

Remortgaging which is applying for a loan with a higher loan-to-value (LTV) to release equity has traditionally been an option, although for many this is not the most cost-effective solution.

Usually provided by a specialist lender with the help of an independent broker, a second charge secured loan has the potential to be a far more flexible and cost-effective option.

What is a Second Charge Secured Loan?

The term ‘secured loan’ applies to any loan issued on the basis of security. Most secured loans are secured against the applicant’s home, though other assets of value may be accepted by highly specialized lenders.

Second charge secured loans are typically available in sums of £20,000 or more and are secured when a first charge mortgage is already in place. Credit checks and financial status assessments can be more relaxed than with a personal loan, as the balance of the loan is effectively ‘insured’ by the security provided.

If the borrower fails to repay the secured second charge loan as agreed, the lender is entitled to take ownership of their property in the same way as they would if a first charge mortgage were not paid on time.

What Are the Best Second Charge Secured Loan Rates?

Interest rates on second charge secured loans vary significantly from one product and lender to the next. On a typical second charge secured loan the APR could be set at between 3% to 5% per annum.

With a short-term second charge bridging loan, monthly interest can be as low as 0.5% or less or approximately 6% per annum.

Comparing the market in its entirety with the help of an independent broker holds the key to accessing the best secured loan rates available. The amount you need to borrow and how quickly you intend to repay it will have a major impact on overall borrowing costs.

How Much Can I Borrow with a Second Charge Secured Loan?

Maximum loan size is based primarily on how much equity you have tied up in your property. If you own your home and it has a market value of £300,000, you will be able to borrow close to this amount. If you have a mortgage of £200,000 in theory, you may be able to borrow £100,000 on a secured loan.

The more you need to borrow, the greater the extent to which your financial circumstances will be checked. Working with an independent broker is essential to ensure you find a better deal to suit your needs and your budget.

What Are the Benefits and Risks of Secured Loans?

The main benefits of secured loans are simplicity and affordability. A typical secured loan will not only attach lower rates of interest than a comparable personal loan but can also be arranged and accessed much quicker than a typical mortgage.

You can also borrow much more with a secured loan, in accordance with the value of your home. Poor credit applicants can be accepted by many specialist lenders, as are the self-employed and those with a history of bankruptcy.

Additionally, arranging a second charge secured loan may work out cheaper than a full remortgage.

The downside to a secured loan is the risk of forfeiting your assets in the event of non-repayment. In the vast majority of instances, though, lenders will do all they can to prevent this from becoming necessary. All potential risks and key factors to consider will be disclosed by your broker during your initial consultation.

Secured second charge lending activity has maintained its momentum across much of the UK, despite difficult conditions during the recent lockdown. Published data suggests that in October, monthly volumes increased a further £19 million to reach £71 million. Total secured loan completions were also up more than 30% from the month before, reaching 1,816 loans completed.

Loan completion times were also found to have improved between September and October, averaging around 11 days compared to the previous 12 days.

Further Growth Predicted

The Finance & Leasing Association (FLA) reported a major spike in second charge lending in August, fuelled primarily by pent-up demand being released on the sector following the first national lockdown.

Going forwards, experts believe that activity will double by the end of the current quarter.

The message from the secured loan industry is very clear: It is business as usual in lockdown 2, with no significant changes or restrictions to criteria announced following the PM’s announcement of a second lockdown.

When coronavirus hit in March lending figures dropped over 80% but this time round it is very different as October showed the biggest monthly growth of 2020.

There is now no restriction on physical valuations and for over a decade the industry has offered a huge range of products available using Hometrack or similar desktop valuation models.

The optimism stems from several lenders announcing a securitisation in recent weeks.  First, we saw Pepper Money owned by Optimum Credit announce the first securitisation (specifically for second charges) since the start of the pandemic to the tune of £277m and a huge easing of criteria followed to ensure a return to pre-COVID-19 lending levels in the coming months.

West One parent company Enra Specialist Finance also announced their first ever securitisation of £267m to be split across their first and second charge products.

We were approached by a young couple from Cambridge who for various reasons were struggling with financial debt.  Between them they had accumulated seven credit cards all with maxed out balances, multiple fully utilized overdrafts and a handful of personal loans, all on varying higher rates of interest and all requiring payments each month. The clients were only able to meet the minimum monthly requirements so the balances were remaining virtually unchanged.

Urgent action was needed but their own bank and several others had rejected their applications for debt consolidation as they failed to pass the tick box underwriting decision making preferred by those lenders.  UK Property Finance suggested a debt consolidation loan with one of our chosen lender panel and accessing the preferential underwriting we had managed to negotiate. We carefully presented the clients case to the lender and successfully proved the benefits of repaying the clients multiple debts with one single payment, competitively priced loan which ensured the subsequent repayments would be well within the clients means.

Ultimately, we managed to shrink the clients monthly outgoings by approximately 45% by reducing the overall interest charged. This provided our clients with significantly more disposable income and helped them to revert back to enjoying life again.

As their consolidation loan was offered in the form of a second charge mortgage loan secured against their property, we were able to negotiate an unbeatable rate of interest via the preferential rates negotiated from our panel of carefully chosen market leading lenders.

Britain’s secured borrowing market has seen significant and on-going growth for several consecutive years. Particularly in the more specialist sectors of the secured loans arena, application volumes are peaking and showing no signs of abating.

But what exactly is fuelling this UK-wide secured loans increase? What’s behind the secured loans rise in both private and business borrowing circles alike?

Greater Availability

For one thing, brokers and lenders alike are gradually beginning to acknowledge the importance of diversifying their portfolios. 

Traditionally, secured loans have been seen as something of a last resort. In addition, credit scores have been considered the be all and end all by far too many lenders. The public has been crying out for more flexible and accessible funding solutions, which on the High Street at least have been thin on the ground at best.

Today, there’s a growing network of specialist lenders across the UK working hard to turn things around. From short-term bridging loans to subprime mortgages to development finance, the availability of diverse and dynamic secured lending products is at an all-time high.

The more difficult it becomes to qualify for a traditional High Street loan, the greater the number of applicants turning to the UK’s specialist lending sector.

Regulatory Changes

Of course, the supervision and control of the Financial Conduct Authority has also renewed confidence in a sector that was once viewed with scrutiny. Taking charge of the regulation of the entire secured loan sector, the FCA is committed to the implementation of on-going improvements for the benefit of the borrower.

The result of which is a secured loans market that’s significantly more transparent than it has ever been. Interest rates are plummeting, irresponsible lenders are being driven out of business and the market is booming as a result.

The Flexibility of Secured Loans

One of the most attractive characteristics of a secured loan is the fact that it can be used for just about anything. Traditionally, High Street lenders have offered a relatively limited portfolio of secured loans with very specific purposes in mind. Mortgages being a prime example – available exclusively for property purchases and subject to strict terms and conditions.

Even with all the collateral in the world and an enviable financial position, a poor credit history could still see applications rejected.

By contrast, the UK’s specialist lending sector focuses heavily on flexibility and accessibility. In terms of limitations, there aren’t any – secured loans are available to cover absolutely any investment or outgoing. Bridging loans in particular provide limitless security, which can be used for any legal purpose whatsoever.

In addition, new-generation secured loans are routinely issued with no credit checks or proof of income required. The only proviso is the provision of sufficient collateral to cover the cost of the loan – the rest is of little consequence.

For obvious reasons, this has come as a welcome lifeline for millions of businesses and households affected by imperfect credit. Specialist secured loan applications are considered by way of individual merit – not simply counted out of the running based on credit issues alone.

Low Interest Rates, Minimal Borrowing Costs

If all this wasn’t enough, there’s the added appeal of the lowest possible interest rates and unbeatable borrowing costs. As secured loans are issued against the value of the applicant’s property or assets, they’re considered comparatively low-risk credit facilities. The lower the risk on the part of the lender, the lower the resulting costs for the borrower.

Hence, in many instances where both secured and unsecured loan options are available, it can prove exponentially more cost-effective to go with the former.  Particularly given the speed and simplicity with which a secured loan can be arranged.

Accessing the best secured loan deals in the UK often means looking beyond the High Street – consult with an independent broker for more information.