A secured loan is only available to homeowners who currently have a mortgage on their property. Secured loans are often referred to as homeowner loans, second charge loans or second mortgages. Secured Loan lenders protect their investment by securing their interest against your property in the form of a second mortgage, known as a second charge so your home may be it at risk if you cannot keep up with the repayments. Secured homeowner loans may allow you to borrow larger amounts of money, spread the payments over a longer period of time, up to 25 years, and in some circumstances obtain a lower rate of interest than with an unsecured loan. If you are spreading the payments over a longer term then you will be saving money on a monthly basis but you will also be paying more in the long run, so you need to decide what your priority is. You can search the whole of the market and compare secured loans using our secured loan calculator.  If you own your property with your wife, partner, friend or family then any secured homeowner loan application will have to be in joint names. As with unsecured personal loans, the lender will conduct a credit check and they will look at your ability to repay the loan by not only considering your income, but also by looking at your monthly outgoings. As the loan is secured against your property a secured homeowner loan will usually take longer to arrange than an unsecured personal loan as the lender will require additional information. The lender will conduct a search of the Land Registry which holds information on your property such as who owns the property, whether the property is freehold of leasehold, anyone who has a legal interest in your property and other information such as any rights of way over the property or restrictions on the use of land. Your existing mortgage company may have what is known as a Restriction over your property, in which case the secured loan lender will have to grant their consent in writing to place a second charge on the property before proceeding. If your property is leasehold the leasehold management company may also have a restriction on the property and the same will apply. The lender will also require confirmation of how much your property is worth and it is normal to conduct a full valuation once all of the other paperwork has been obtained. Secured loans usually involve paying an administration fee to the lender which is added to the loan, and as most secured homeowner loans are arranged through loan brokers a broker fee may also be added to the loan. Most secured homeowner loans are now covered by the Consumer Credit Act so if you want to pay off your secured loan early the lender can only charge you one month’s interest and apply a one month notice period, however please bear in mind that when you come to redeem the secured loan that the balance will include any fees that have been added to the original loan. If you have been turned down for an unsecured loan and are a homeowner then a secured loan may be the only option. If you are in negative equity or have less than 25% equity in your property then you may also struggle to obtain a secured loan. In this case, if you are struggling to get credit and have been turned down for a loan use our free refused credit tool to find a solution. If you are struggling to make your monthly payments then you may qualify for some debt forgiveness and even write off some of your debt by applying for debt help. 

 

 

 

 

 

Dan Gale, Moneyextra.com May 2009