Depending on your financial circumstances and your goals, a secured loan may well be the right solution for you. Especially if your mortgage is on a low rate and fixed long term. At The Mortgage Broker, we will fully understand your financial circumstances and advise you on whether a Secured Loan is more appropriate than a Mortgage or Remortgage when getting access to cash.
It is really simple to get a secured loan, and The Mortgage Broker work with a number of specialist partners and lenders, to ensure that we get you the absolute best rate and most suitable terms that meet your needs.
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What is a Secured Loan?
Secured loans, sometimes called homeowner loans, home loans, or second-charge mortgages, let you borrow money against the equity in your house. These sit on top of the mortgage, with the lender putting a charge on your property in addition to your mortgage lender. If for example, your mortgage is 55% of your home value, you will have a remaining 45% in equity that a lender can secure a charge against to release a % of that to you in cash.
- Home Improvements
- Debt Consolidation
- Bad Credit Solution
- Large Purchases
- One off Large Costs
- Business Purposes
Who can apply for a secured loan?
If you own an asset, such as a house, then you can apply for a secured loan, also known as a second charge mortgage.
5/5 Our advice score across Trust Pilot, Google and Facebook 30+ Industry Awards across different specialist lending areasCan a Mortgage Broker Help Get the Best Secured Loan Rate?
There are different routes you can take when you need to borrow money and one of the right options for you, could be a secured loan. As discussed, this is a type of loan where you can use your property as collateral, much like a mortgage. Whilst a Mortgage Broker typically specialise in searching and advising on mortgages, they can be an invaluable source of independent advice when considering the best secured loan options. As a homeowner, it is very important to understand how a secured loan works alongside a mortgage and a mortgage adviser will ensure that a secure loan is in fact, the right option alongside the mortgage options available to you.
A secured loan might be the best choice if you have a really good mortgage rate and you don’t want to touch alter that in any way. If you require a smaller lump sum of cash, whether for paying off debts, home improvements, a new car or anything else than a secured loan could be the best solution for you and your family. It could also be that you have poor credit and you don’t want to adversely affect your mortgage payments. This is why is it best to speak to a mortgage broker.
How do you know if a secured loan is right for you? In this guide, we’ll break down when a secured loan is a better option than a mortgage and why working with a mortgage broker is crucial for finding the best deal.
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Recently we needed to consolidate some debt and secure it against the house we currently have. The Mortgage Broker has been amazingly helpful and went above and beyond to help us out. Our finances are now in a much more positive place and the team managed to find us a great deal on a secured loan.
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A secured loan can be a better option than a mortgage in certain circumstances, particularly when: 1. You Have Bad Credit If you have a poor credit history or you have experienced financial challenges in the recent past such as missed payments and CCJ’s, securing a mortgage can be more difficult (The Mortgage Broker does have Bad Credit Mortgage Solutions). can be difficult. Mortgage lenders can be perceived to have have more strict criteria regarding credit scores and whilst there are thousands of mortgage options, there are certainly plenty of occasions that we can advise on a secured loan being the best solution. Secured loans are often easier to qualify for with bad credit and with the loan being backed by your property, lenders are typically more willing to take on the risk, making it easier to access cash. 2. You Need a Smaller Loan Amount Secured loans are a great choice if you need a smaller amount of money but don’t want to go through the lengthy process of remortgaging or affect your current fixed mortgage term. While a mortgage is generally better for larger, long-term borrowing, a secured loan can be quicker and simpler for smaller borrowing needs. Whether you’re planning for a home improvement project or consolidating debt, a secured loan may be more suitable than going through a full remortgage process. 3. You Want to Avoid High Early Repayment Charges If you’re currently tied into a mortgage with high early repayment charges, a secured loan may be a viable alternative that helps you access equity in your property and avoid paying off a penalty. Unlike remortgaging, which can come with penalties if you pay off your mortgage early, a secured loan can enable you to access additional funds without incurring significant costs. A mortgage broker can be pivotal here in helping you understand your best secured loan options and guide you in finding a the right solution that releases funds from your property, without any additional charges. 4. You Have a Variable Income Income verification for Secured Loans is much more simple than a mortgage. Whilst it is always important to discuss your mortgage options first, we appreciate that it can be challenging for certain complex circumstances. Traditional mortgage lenders may require consistent income verification, which can be difficult for those who are self-employed or have fluctuating earnings if contracting. There are many scenarios in which secured loan lenders tend to be more flexible with income verification, making them a better option if your financial situation isn’t standard or predictable.When Should You Consider a Secured Loan?
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Why Use a Mortgage Broker for Accessing the Best Secured Loans?
Expert Guidance: A secured loan is a loan against your property, much like a mortgage. Mortgage Brokers are experienced in understanding how these things affect you and can help you evaluate your financial situation to ensure you find the best deal for your needs.
Access to Multiple Lenders: Mortgage brokers have access to a broad network of lenders, many of which may offer exclusive rates or terms that aren’t available to the general public and therefore, you may consider a mortgage as the right solution.
Understanding Your Options: Brokers can explain the nuances of secured loans, helping you understand the differences in terms, such as interest rates, loan amounts, and repayment periods, whilst also helping you through the process.
Saves Time and Stress: Instead of searching for lenders and comparing rates yourself, a broker does all the hard work for you, saving you valuable time and effort.
What’s the difference between a secured and unsecured loan?
An unsecured loan, or personal loan, isn’t charged against your property. As lenders can’t claim against a secured asset they use as collateral if you default, unsecured loans are seen as higher risk and come with higher interest rates. As a result, you generally need a good credit score to get one. Like secured loans, unsecured loans come with agreed repayment terms, including interest rates and the length of the loan. Credit cards are another form of unsecured credit.
What are the advantages of secured loans versus unsecured loans?
Larger loan amounts: It can be difficult to borrow more than £25,000 with a personal loan, but secured loans can offer up to £100,000 or more, which is sometimes required for major expenses like home improvements.
Longer repayment terms: You can spread out payments over a longer time, making monthly costs more manageable.
Easier approval: If you have poor credit, secured loans are often easier to get because your property reduces the lender’s risk.
Secured Loans can be a smart approach to borrowing. Don’t affect your current mortgage rate and monthly repayments on the larger sum, and secure a loan on your property for a small amount until your mortgage rate ends.
Here are some reasons as to why people opt for a secured loan over a remortgage.
If you are looking to borrow a smaller amount of money (smaller being less than the amount of a mortgage) than a secured loan could be more appropriate. This could be used for home improvements such as an extension, or refurbishment, or they could be suitable to consolidate debts into one monthly payment.
With a secured loan, you can get access to funds without going through the entire lengthy process of a mortgage or refinancing your current mortgage. There aren’t as many complexities with a secured loan, but of course, your mortgage adviser would look to understand what you are wanting to do before knowing that a secured loan is better for you.
If your existing mortgage has a low interest rate and you don’t want to lose it by refinancing, a secured loan can provide additional funds without disturbing your current mortgage.this is especially important in the new market we all live in now, as mortgage rates are higher, so you may be moving a large sum to a higher interest rate, when you can just get the extra funds for that cost.
If your credit rating has declined since being on your mortgage, you may not qualify for the best mortgage rate. The Mortgage Broker have specialists in bad credit scenarios and can support your needs here. There are loads of mortgage options for bad credit applications, so this in isolation is not an immediate reason to get a secured loan. You can read around bad credit mortgages here. However, bad credit secured loans may well be easier to obtain with poor credit because of the application process and can often be the best solution for your needs.
Secured Loans can sometimes offer more flexible arrangements for your repayment terms. These may be shorter or more tailored to your needs than a standard, more restrictive mortgage term
Secured loan applications don’t have as many associated costs, such as arrangement fees, valuation fees and legal costs. However, secured loans do come with a fee, so it is important to understand that, but in comparison, it can reduce your initial outlay
Mortgages should always be considered in the first instance. At The Mortgage Broker, we will always review your mortgage first. This is because interest rates are generally lower for a mortgage rather than a secured loan, and for larger amounts and more longer-term borrowing there are further advance opportunities and various mortgage products to consider. Furthermore, if you are looking to access a large portion of your home’s value, then a mortgage or remortgage, could be more appropriate when releasing equity.
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What are the Disadvantages of Secured Loans?
Significant risk: If you default, the lender can repossess your home to recover their money, meaning the security is for the lender, not you.
More interest over time: Stretching the loan over a longer period might lower monthly payments, but it usually means paying more interest overall.
Early repayment fees: Paying off your loan early could result in early repayment fees.
Can I Pay Off a Secured Loan Early?
If your situation changes and you want to pay off your loan early, most secured loans allow this, but you’ll likely face a fee. This fee usually equals a few months’ interest, and your lender can calculate the exact amount. A smart approach is to review your mortgage first, and then ensure your secured loan is compatible with that, and ends or can be broken at a time you need to remortgage, so you can then consolidate it into one mortgage and one payment again.
Are Secured Loans Aasier to Get?
Generally, yes. Since you’re offering your home as security, lenders view you as less risky, meaning they might place less importance on your credit score.
What Should I Consider Before Comparing or Applying for a Secured Loan?
Don’t worry, your mortgage broker will absolutely advise you fully, and we can ascertain whether a secure loan is the right choice for you.
Like all mortgages or loans, secured loans carry significant risks; so it’s important to think carefully before applying.
Consider these factors:
Affordability: We must ensure you can afford the repayments over the entire loan term, even if your circumstances change and ensure the product is suitable, sustainable and affordable.
Loan to value ratio: Lenders will assess how much equity you have in your property to determine how much you can borrow. Loan to value (LTV) is the term use that is the % of your property that you own compared to the mortgage or loan. If your house is worth £500,000 and your mortgage is £250,000 – then your loan to value ratio is 50%.
Interest rates: Many secured loans come with variable rates, so be prepared for potential rate increases – again, this will all be discussed with you.
How Do I Find the Best Secured Loan?
Using a broker is the best approach, for all the reasons discussed here. There are a number of lenders that offer secured loans, and just like mortgages, mortgage advisers will have the best access to comparing these options for you, alongside your mortgage option. The Mortgage Broker have trusted partners that we will work with to ensure you get the right products terms for your financial needs.
Secured Loans UK!
In the UK, there are around 900 Lenders that operate across various types of loan types, including secured loans UK wide. There are a mix of lenders across the high-street banks, building societies, and alternative finance providers, some of which are regulated by the Financial Conduct Authority (FCA), while others operate in niche markets without the need for regulation – such as unregulated bridging.
Secured loans in the UK can be found through various channels, with notable lenders including major banks like Santander, NatWest, Barclays, and RBS, as well as more specialized providers like Evolution Money and Norton Finance. We operate across the UK and can access specialist partners for any of your needs, depending what your financial circumstances require.
To get a secured loan in the UK, you’ll need to provide various documentation. Initially, we don’t require anything to discuss options, and with just your income and property details, can establish the types of options you could expect to see. However, to proceed with a more accurate quote, and secured loan application, you will need to provide you adviser with the following: 1. Proof of Identity Passport or driving license. 2. Proof of Address Recent utility bills, council tax bills, or bank statements (within the last 3 months). 3. Proof of Income Recent payslips ( the last 3 months or 12 weeks), P60, or tax returns if self-employed. 4. Bank Statements Bank statements from the last 3-6 months. 5. Property Details Mortgage statement, or, proof of ownership (title deeds) 6. Existing Mortgage Details Details of outstanding debts, including other loans and credit card balances. 7. Credit Report (potentially) Lenders may request your credit report or perform a credit check if deemed necessary.What Documents are Needed to Get the Best Secured Loan?
Purpose: To confirm your identity and prevent fraud.
Purpose: To verify your current residence.
Purpose: To ensure the secured loan is affordable and to evidence your ability to repay the loan.
Purpose: To show your financial stability and cash handling.
Purpose: To evidence ownership and the value of the property the lenders are secured the lending against.
Purpose: To assess your overall financial profile and ensure you can manage the new loan.
Purpose: To evaluate your credit history and assess the risk of lending to you.