Our Secured Loans Video Explainer is the best place to start
Now that you’re familiar with what a secured loan is and how they work, you might still have a few queries left unanswered. So here are some of the most frequently asked questions relating to secured loans:
Why choose a secured loan?
Secured loans can come with many advantages, such as having a longer period of time to repay or being able to borrow more. Stretching the repayments out for longer means the monthly repayments can be more affordable. It can also be much easier to get approved for a secured loan than an unsecured loan. You also do not need a perfect credit score in order to be eligible.
What do I need to do to qualify?
If you are a UK resident and are over the legal age of 18, you may apply. If you are also a homeowner or have a mortgage with sufficient equity in it that can be used as collateral, then you could be eligible for a secured loan.
How can I apply for a secured loan?
The first thing you might want to do is work out how much you may need to borrow. However, comparison websites are not really too helpful as they don’t factor in your circumstances and needs. Secured loans are regulated, just like a mortgage. Therefore you should speak to an adviser who will compare the whole market of loans and remortgages to find you whatever is most suitable. They have the experience to consider options you may not have thought about – It’s really important to get good advice.
How long does it take to get approved?
Since every single case is different, it is hard to give an exact time frame. The first thing an adviser will do is gather your circumstances and requirements by completing a “Fact Find”. The adviser will then go on to finding a suitable loan for you from the panel lenders, which offer over 2250 products.
They will send you indicative terms, discuss the recommended loan with you and then send you a copy of the proposed agreement. You can then complete an application for the chosen lender and send in further information needed to satisfy the lenders needs
The decision on the recommended product can be made fairly quickly so long as the adviser has the relevant information such as proof of your income and details of your property, mortgage etc. A suitability report (or recommendation letter) is issued with details explaining why the adviser thinks the loan is sustainable and how it meets your aims.
The time to complete your loan thereafter is partly down to what other enquiries need to be made of third parties such as a valuation (if required). The more information you can provide the better. It’s possible to complete in a week or so but the norm is more like 4 to 6 weeks simply because some applicants are slow sending information in. If you are in a hurry, tell your adviser at the outset so they can tell you what information to gather.
Can I repay a secured loan early?
The option to pay off a secured loan is almost always there. However, many lenders may charge for an early repayment. For example, if you have opted for a fixed rate you may have a penalty of 1 or 2 months interest if you settle during the fixed rate period. This is because the lender has priced the fixed rate offer assuming it runs for the full term. Many products don’t have an early repayment charge.
Your adviser will discuss your plans and requirements and will explain any early repayments charges if applicable. If you don’t plan to change your loan in the near future it may be better to have a loan with an early repayment charge in order to get a better rate or a particular type of product. It all depends on the terms and conditions of the credit agreement.
What happens if I miss a repayment?
Missing a payment is likely to have some consequences. It can cause some serious damage to your credit report which could affect your ability to borrow, and the rates available, in the future. Missing payments regularly or failing to make multiple consecutive payments, can lead to the lender taking proceedings to get your repayments back up to date. If this is unsuccessful they can consider repossessing and selling your property to recoup for the lost finances.
If you are struggling with repaying your loan, you must contact your lender straight away and they will talk you through the available options.
Can I still qualify if I don’t have any assets?
If you are not a homeowner, or if you do not have any valuable assets that lenders may consider eligible, there’s still a chance you can apply for an alternative loan. That can be an unsecured business loan for an example. Speak to an advisor here at Promise and we will give you some advice regarding alternative loan options.
What can I use a secured loan for?
There are many reasons why secured loans are helpful, but people take these out for a number of different reasons:
Honeymoons or Luxury Holidays
Paying off debts
There are many more options and plenty of secured loan types to choose from. Therefore whatever you need the extra cash for, as long as its legal and responsible, most lenders will consider any purpose.
How many secured loans can I take out?
There is technically no limit to how many secured or unsecured loans a single person can have at one time. However lenders will have their own policies and generally will only allow one secured loan per property you own.
It’s crucial to be responsible with your repayments and know that you can afford the repayments now and in the future. After all, your home is at risk if you fail to keep up the repayments on a loan secured on it.
If you are unsure whether you should take out a secured loan but you already have an existing one, speak to your advisor or contact Promise Money.
Promise Money is a broker not a lender. Therefore we offer lenders representing the whole of market for mortgages, secured loans, bridging finance, commercial mortgages and development finance. These loans are secured on property and subject to the borrowers status.
More than 50% of borrowers receive offers better than our representative examples
The %APR rate you will be offered is dependent on your personal circumstances.
Mortgages and Remortgages
Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317,807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66
Secured / Second Charge Loans
Borrow £62,000 over 180 months at 9.9% APRC representative at a fixed rate of 7.85% for 60 months at £622.09 per month and thereafter 120 instalments of £667.54 at 9.49% or the lender’s current variable rate at the time. The total charge for credit is £55,730.20 which includes £2,660 advice / processing fees and £125 application fee. Total repayable £117,730.20
Annual Interest Rate (fixed) is 49.7% p.a. with a Representative 49.7% APR, based on borrowing £5,000 and repaying this over 36 monthly repayments. Monthly repayment is £243.57 with a total amount repayable of £8,768.52 which includes the total interest repayable of £3,768.52.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME
REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Promise Money is a trading style of Promise Solutions Ltd – Company number 04822774Promise Solutions, Fullard House, Neachells Lane, Wolverhampton, WV11 3QG
Authorised and regulated by the Financial Conduct Authority – Number 681423The Financial Conduct Authority does not regulate some forms of commercial / buy-to-let mortgages
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