What You Should Consider When Taking Out A Secured Loan
There are a number is things to consider before taking out a secured loan. Some of the main ones are: –
- Which sort of interest rate you are looking to take – this is a major point as interest rates can vary by significant amounts. Understanding the difference between fixed and variable interest rates is important before signing up to a product. When working out your available budget, consider whether you could afford interest rate rises. If not, you may want to consider a fixed rate, even if you must pay a small premium for it.
- How long are you looking to borrow the money for? Some second charge mortgages have early repayment charges. This means that to pay off the loan early, you must pay an additional charge or ‘penalty’. If you’re looking to repay the loan within the first few years of taking it out, consider looking only at loans with no early repayment charges.
- Finally, and potentially most importantly, is the loan affordable? The consequences of failing to keep up the monthly repayments can be severe. As the loan is secured on your home, it is vital that you only consider borrowing money that you are confident that you can afford the repayments on, both now and in the future.
Finding the Right Secured Loan for You
There are thousands of secured loans out there and the difference between products can be significant. When looking to take out a new homeowner loan, it’s important that you find the best deal, as the cost of choosing poorly can run into thousands.
There are two main methods of ensuring that you find the best deal, the first option is talking through your needs with a broker. They will then check with their panel of lenders and offer you their best deal. The benefit with this method that your broker should take all of your circumstances into account to find the best deal available to you although some broker fees could be as much as 15% on top of the loan.
Secondly, using a comparison tool online, you can find the best deal yourself and apply online. Although the application is online, the details may then passed to a broker to complete the application and the above would apply.
We handle the whole packaging process ourselves so you can be assured that we have a full understanding of your application.
Secured Loans and Bad Credit
Secured loans are potentially still available to you if you’ve suffered adverse credit. It’s often easier to qualify for a second charge mortgage compared to other types of loan if you’ve got a poor credit history.
Often, second charge mortgages can be your best option as you can achieve much lower interest rates. In addition, the chances of being accepted are far higher than they would be for an unsecured loan.
Comparing the total cost of credit and whether you are happy to borrow against your home are important steps before borrowing. Our expert advisors are there to talk you through each step of the process and ensure you end up with the most suitable product.
Understanding Secured Loan Monthly Repayments
Taking out a secured loan can reduce monthly outgoings when consolidating debts. Although this is a real positive for many, the total cost of borrowing should always be considered when taking out a new loan. However, if you extend the term of the loan even though the initial payments may be less the overall cost can work out more. It is important that you consider all of the options before deciding to go ahead and ur advisers will talk them through with you.
Secured Loan Broker Fees
Broker fees are a big issue in the second charge mortgage market, with lots of brokers charging 10% broker fees (£4,000 on a £40,000 loan). Some are even charging as high as 15% on top of the loan.
At ABC Finance Ltd, we pride ourselves on never charging unfair fees to our clients. As such, we charge a flat broker fee, with no hidden application fees. On larger loans our fixed fee structure can make a big difference to the fees you pay.
Enquire now to talk through your needs with one of our experts, or call us on 01922 620008. Alternatively, enquire online and apply online for one of our low cost loans.
Rates from 4.2% APR variable. To enable us to help customers with varying requirements we also have plans available up to 20.9% APR.
Representative Example: Assuming you borrow £20,000 over 10 years at an Annual Interest Rate of 6.65% (variable) you would make 120 payments of £246.84 per month. The total amount repayable including a lender fee of £598 and a typical packager fee of £995 (added to the loan) would be £29,770.80. For comparison the overall cost would be 7.2% APRC representative.