Borrowing Tips - Secured Loans

About Secured Loans

A secured loan is a loan where you provide the lender with some security against the money they loan to you. The security for secured loans is your home. If a loan is secured against your home and you already have a mortgage then they are known as second charges.

Secured homeowner loans are available in varying amounts and for many different purposes, including debt consolidation. The amount can range from as little as £3,000 to as much as £100,000. The loan is repaid monthly over an agreed period, which will usually range between three years and twenty five years. There may be early redemption penalties with secured loans so check the small print.

You will usually find that secured loans are easier to obtain than unsecured loans due to the fact that the lender has some security in the event that you are unable to repay the debt. Where you have equity in your home they can provide easier access to capital for self-employed or those who are unable to get lending from other providers.

Protection

Consumer Credit Act
Under the Consumer Credit Act 1974 secured loans up to a value of £25,000 are subject to regulation .When you are approved for a loan you will have to sign a credit agreement so make sure you read and understand the terms of the agreement. Regulated loans under £25,000 means that the lender has to give you seven days as consideration period after the loan is taken out in case you wish to cancel the agreement.

Payment Protection
You can insure your payments so that you can still make payments if you lose your job or you are off work through accident, sickness or unemployment. Check for exclusions as there are various levels of cover and costs associated.

Secured Loans Summary

Typical Features:

• Secured lending ranging from £3,000 to £250,000

• No initial costs • Repayment periods over 25 years

• Most providers offer protection policies

• Maximum 110% Loan-To-Value (LTV) where there are a small number of defaults or arrears

• Maximum 125% LTV where there are no defaults or CCJs Whatever you decide make sure you consult a independent broker or financial advisor.

The opinions expressed are those of the author only. The material is for general information only and does not constitute legal, financial or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation by an FSA authorised company where the market is FSA regulated.

Think carefull before securing other debts against your home. Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.