Here are some common FAQs on the subject of secured loans.
How long will I need to wait?
Once the lender has your completed paperwork, and provided there are no unforeseen issues, you should usually receive the funds in about 3 weeks.
Is there a lot of paperwork involved?
Generally you will have to provide details of your identity, address and income. You may also have to sign a loan agreement and mortgage deed and in all cases proof of your property value will need to be obtained.
How may a secured loan be advantageous?
You could have a competitive rate on your current mortgage that might not be available if you were to take out a new remortgage for a higher amount to raise the extra funds you need. A secured loan would allow you to retain your current mortgage with its low interest rates whilst taking out a ‘second charge’ loan for the basic amount of extra money you need.
In some cases, you may be able to obtain a loan that offers a payment holiday after a given period of good payment conduct, which could assist with reducing your monthly outgoings for periods where your financial circumstances may temporarily change.
Secured loans are often cheaper and easier to obtain than unsecured loans.
What if I am unable repay the loan?
Remember that as long as you keep up the repayments on your loan, your property will not be at risk. Responsible providers will always work with you to help ensure you can afford to borrow the amount you are asking for. They will also be keen to help you to understand the available options to keep your interests protected.
For example, it may be possible to take out insurance to cover your repayments in the event that you were taken seriously ill and unable to work.
If you do have problems repaying the loan, most lenders will be keen to do all they can to help you. Typically, they are very reluctant to commence recovery actions and would only take steps in that direction as an absolute last resort.
In the final analysis, if you were unwilling or unable to repay the money, the provider may be able to force the sale of the asset you used to secure the loan amount.
Do I need to pay anything in advance?
No. A reputable provider or broker will never ask for fees in advance of providing the loan.
Can I get a loan even if I can’t provide proof of income?
Since the credit crisis in 2008, there are no secured loan providers offering products where no proof of income is required.
Generally speaking, lenders will now require recent payslips for employed applicants and certified accounts for the self employed. However, even if you do not have this information to hand, it is always worth enquiring with us, as other types of information are acceptable as proof of income in certain circumstances.
What if my mortgage is in arrears or I have bad credit references?
Some providers may be able to arrange secured loans irrespective of your financial circumstances. However, it will be important to have equity in your property so that the borrowing can be secured.
Sometimes this form of borrowing is referred to as a ‘bad credit loan’.
Bad credit loans may involve slightly higher interest charges as a reflection of the increased risk to the provider.
As always, the fact that you are offering to secure the loan may be a significant advantage when applying for finance.
How much will I need to pay out each month?
This largely depends on how much you want to borrow and the length of time you need to pay the loan back.
Are secured loans dangerous?
Not if you keep up the loan repayments. If you do not, the main danger is that you may lose the asset you used as security – such as your home or car.
Unfortunately, this may result in the provider forcing the sale of the asset and recovering their costs from the proceeds.
There are many precautions that can help you avoid this and if you make the repayments on time, you will have nothing to worry about.
How much can I borrow?
That is a difficult question to answer because it depends very much on your personal financial circumstances and to some extent, the purpose of the monies you wish to borrow.
What purposes can the loans be used for?
The provider will typically require you to declare the reason why you are looking to borrow money. Debt repayment (sometimes called debt consolidation) may be seen as a perfectly legitimate reason.
Some lenders may have conditions that restrict what you can use the amount for, or may even require evidence that you have spent the money on the things that you said you would (e.g. you may be asked to supply copy invoices).
Can I change my mind?
Following completion of a loan, you have a statutory right to return the loan without penalty within 14 days of the date of completion. Details of this right and all terms are included in every credit agreement issued by any lender.
How easy is it to apply?
This varies on how you apply for the loan. If you use an online loan service, it typically involves just filling out simple contact form. The provider’s (or broker’s) customer service representative will then contact you and take you through the next steps.
The entire end-to-end process is usually quite straightforward.
How long do I have to pay back the amount?
That may vary, depending upon the provider, your own preferences and the amount you are borrowing.
Secured loans typically run over a period ranging from 3 to 25 years.