When is it time to think of a secured loan? Well, if you thinking of raising money for household maintenance, repairs, extensions or perhaps personal costs or a large tax bill, then, for most people, a remortgage is probably the first thought. Remortgaging has hit a 9-year high and can allow often allow you to switch to a product more suitable for your financial situation, often improving your payable interest rate. However, borrowers with bad credit, very small mortgages or who are self-employed, may discover that the application process and fees incurred from a remortgage can offset these advantages.
A second charge mortgage/loan, often known as a secured loan, is an additional loan paid alongside an existing mortgage, often with another lender being used. So, what are the benefits of a secured loan?
Low Credit Score
Previous or current adverse credit such as County Court Judgments (CCJs) or defaults on payments, will likely cause either a rejection by a lender or higher interest rates when applying for a remortgage. Second charge loans offer a viable alternative for those with adverse credit, as many lenders do not rely on credit scoring alone to approve loan applications – there is a degree of human underwriting involved. They offer a more bespoke approach based on your individual circumstances, which means they can make decisions based on the whole picture providing it can be evidenced that the loan is affordable to you. Second charge mortgages are regulated by the Financial Conduct Authority meaning you are offered the same protections as those provided in connection with first charge mortgage lending.
We have access to a recently launched second charge product from one of our many lenders, that has no minimum credit score, considers each application on a case-by-case basis and accepts CCJs and defaults either below £350 or over 2 years old.
Self-Employed or Fluctuating Income
It can also be difficult for self-employed workers, zero-hour contract applicants or those with a fluctuating income to apply for a remortgage due to the tougher regulatory stance now being taken by lenders, on both income and your ability to repay a loan. As with those with a poor credit rating, second charge loans are often a way of assisting self-employed borrowers providing you are able to evidence your income. We have access to a second charge lender that only requires one year’s self-employed trading history and will consider undistributed profit and projections.
Speed and Cost
Another benefit of a second charge loan is the speed and cost of the application process when compared to that of a remortgage, which could incur large costs such as an ‘Early Redemption Charge’ (ERC) potentially running into thousands of pounds as a penalty for ending your current mortgage product early. With a secured loan there are options to pay survey fees upfront or add them to the borrowing, and there are no conveyancing or solicitor costs, unlike a remortgage. Where speed is important, where time or deadlines are tight, or you need to raise money quickly, remortgaging can be a lengthy process, most commonly taking between one to two months providing that the application runs smoothly and doesn’t have any problems. Complications such as a rejected application may be more common with self-employed and low credit score applicants. Hence, the benefits of a secured loan with funding in a matter of a few days, perhaps a couple of weeks, make clear and logical sense when compared to a remortgage.
Let us say “Yes, we can help” – Secured Loan
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THINK CAREFULLY BEFORE SECURING ANY LOAN AGAINST YOUR HOME