Second charge secured loans fall in to two main camps:
Secured on a borrowers main residence or for personal use
Loans of this nature tend to be regulated by the Financial Conduct Authority and are sold on a fully advised basis.
Common regulated loan purposes include:
- Home improvements
- Debt consolidation
- Deposit to buy another property
- Short term lending to buy a new home before selling existing home.
- Tax bills
- Clear debt management plans or IVA’s
- Holidays and weddings
- To fund property purchase for a family member
- To inject capital in to a business
It’s more common that the loan purpose is a combination of the above and other purposes
Secured on a BTL property or “Business Borrowing” secured on main residence
These loans tend to be non–regulated. You are treated as a business person rather than a consumer. There is less regulatory protection for borrowers and the process is normally less long winded. Rather than being given advice your broker may offer you choices which most closely match your stated requirements so you can choose which you feel suits you best.
Common non–regulated loans purposes include:
- Second charge loan on a BTL property to raise a deposit to buy another
- Portfolio second charge secured against multiple BTL properties
- Second and third charge business loans for start up businesses
- Business loans for expanding existing businesses
- Business loans for recovering businesses with poor historic trading or adverse credit
Always read the paperwork you are given carefully to unsure the product or service you are offered matches your requirements. If you have any doubts or misunderstanding, always ask.