Secured Loans fall into two camps, regulated and unregulated. Regulated secured loans offer customers maximum protection from bad practice. This includes strict rules and an automatic right to use the Financial Ombudsman Service. The property offered as security is the main factor in determining whether a loan is regulated or not. Loans secured on residential homes are normally regulated. Loans secured on property other than homes (for example, buy to let or commercial buildings) are normally unregulated.
Capital and Repayment
Each repayment pays back some capital (amount borrowed) and interest. This means the amount outstanding reduces gradually over time until it is settled in full at the end of the term (providing all repayments were made on time).
Some lenders offer interest only loans. As the name suggests repayments cover purely interest so the capital (amount borrowed) is not reducing at all. The balance of the loan will be the same at the end of the term as it was at the start. An “exit route” approved by the lender is needed. This is a source of money enough to settle the loan in full by no later than the end of the agreed term. For example an endowment policy or sale of a house.
There are also different ways in which a lender can apply their interest rates:
Standard Variable Rate (SVR)
A standard variable rate means the rate is set by the lender and can change throughout the duration of the loan. Though a lender will aim to be competitive in the market you are still by and large in their hands and the rate can go up or down at any time.
Base Rate Tracker
Similar to a Standard Variable Rate the interest rate is set at a margin above the Bank of England’s base rate. For example if the base rate was 1% and the lender was offering base rate plus 2.5% the rate charged would be 3.5% (1% + 2.5%) . If the base rate went up to 2% the rate charged would become 4.5% (2% + 2.5%). It would always be the same % above the base rate. An advantage of this type of loan is the rate only goes up when the Bank of England’s base rate goes up. In recent years the base rate has been low and hasn’t fluctuated greatly.
Fixed Rate Loans
Interest is fixed for a specified period of time. For example, for the first 1 to 5 years. The advantage of this type of loan is that it gives the customer a guaranteed monthly payment that will not change during the fixed rate period. At the end of the fixed rate period the loan normally switches to the lenders standard variable rate.
Capped Rate Loans
Capped rate loans have a maximum above which they can not go. For example a loan capped at 5% could be no more than 5% even if the lenders standard variable rate were higher. The advantage of this type of loan is that they give the customer some certainty and protection from rising interest rates.
Lenders offer discounted rates to entice customers to apply. They discount (reduce) the normal rate applicable in an attempt to look more attractive. For example if the standard variable rate was 5% and the lender was offering a 2% discount the rate charged would be 3%. The discounts apply for a set period only which is made clear at the start, normally 1 or 2 years.
How to apply for a secured loan
Most secured loans are applied for through intermediaries / advisers like Promise Money. They tend to have access to a wide range of products. This maximises the options they have to recommend a loan which suits the customer’s needs.
To talk to one of our advisors, simply fill in the quote form below or call 01902 585020.
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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