Secured Loan Broker – Market Leading Fees, Rates & Service
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in secured loans
What is a secured loan?
A secured loan is a type of loan that is secured against a property. The security property can be either your home, or an investment property (known as buy to let secured loans). Almost any property can be used, as long as it has sufficient equity to act as collateral for the loan according to your chosen lenders loan-to-value ratio criteria.
Secured loans are known by a few names in the UK, which can lead to confusion, such as homeowner loan, home equity loan or second charge mortgage.
They’re often used to raise funds for debt consolidation (such as repaying existing loans or credit cards), to fund home improvements or to finance a major purchase, such as a car or wedding.
Interest rates are usually lower than those on unsecured credit such as personal loans, as the lender has greater security by way of a legal charge over your property. Due to the security offered with these loans borrowers with a low credit score are more likely to be approved.
How does a secured loan work?
A secured loan works by releasing the money to you as a lump sum, which is then repaid over the loan term through regular monthly repayments.
These loans sit alongside your existing mortgage, leaving you with two monthly repayments to make each month.
Secured loans allow you to borrow against the equity in your property, either your home or an investment property (the difference between your property value and your current mortgage balance).
The amount of money you can borrow is decided based on your property value, the proposed loan to value ratio, your credit score (or credit history) and the lender’s affordability guidelines.
When a secured loan is taken out against your home and is not solely for business purposes (for example, to start or invest in a business), the loan is regulated by the Financial Conduct Authority (FCA), which means you’ll benefit from increased consumer protection, similar to the protection you get when you apply for a mortgage.
Why choose a secured loan?
Secured lending allows you to borrow more money over a longer term, and often at lower interest rates than would be possible using unsecured lending.
For this reason, it’s a really popular option for borrowers who need to borrow larger amounts (usually over £15,000) while keeping the monthly repayments at a manageable level.
They can be arranged quickly, usually 3-14 days, making them a great option for when you need funds quickly.
What happens if I default on a secured loan?
Should you default on your loan, your credit history will be impacted, your credit score is likely to drop and the lender will look to recoup their money.
Should this situation continue, you would eventually become at risk of repossession.
For this reason, we always undertake full affordability checks to ensure you’re comfortable with your proposed loan repayments. Where things look a little tight, we will advise you on the options available, which may include borrowing slightly less, consolidating unsecured debts to reduce your monthly costs or extending your loan term.
What’s the difference between a secured and unsecured loan?
An unsecured loan, also known as a personal loan is not secured against an asset, meaning the lender has no collateral. As there is no security for the debt, lenders are unable to easily repossess your assets to recoup their funds should you fail to keep up repayments.
With this in mind, unsecured borrowing is harder to qualify for as the lender is at risk should you default on your loan. Unsecured loans also come with lower loan amounts, a shorter loan term and higher interest rates than secured loans. For this reason, secured loans can be a very strong option for those who need to raise finance but have been refused for other types of credit, such as a personal loan or credit card.
What are the advantages?
The key advantages to consider are:
- You can borrow larger amounts when using your home as security (or an investment property). While personal loans are usually capped at £25,000, secured loans can be taken for anything from £5,000 to £500,000.
- It’s easier to qualify for a secured property loan or second-charge mortgage, even if you have adverse credit history or a low credit score.
- You can borrow over a longer loan term and often at lower interest rates than would be possible using unsecured finance or credit card debt. This means a lower monthly cost and more affordable repayments each month.
- Lower monthly repayments and the ability to pay through one simple direct debit payment means they’re a convenient way to borrow money for those who are struggling to manage their monthly outgoings. This makes them a popular option for debt consolidation or to fund business investment where money may be tight in the short term.
- When secured against your home, these loans are regulated by the Financial Conduct Authority (FCA), meaning you have strong consumer protection.
What are the disadvantages?
They key disadvantages are:
- The application process is longer than those for unsecured finance such as an unsecured loan or credit card debt. While they can be completed almost immediately, a secured lending application can take anything from 3-14 days to complete.
- Should you default on your monthly repayments, your not only will your credit history suffer, but you could be at risk of repossession in the longer term.
- Should you choose to extend your loan term to reduce your monthly costs, you will pay more interest in total. This can be counteracted by reducing your loan term, but will result in higher monthly repayments.
- Should you choose to repay your loan early, you may face early repayment fees – although we do offer options with no exit penalties.
- Some brokers charge very high fees for their service – often up to 12.5% of the loan amount. At ABC Finance, we charge a low, fixed broker fee that saves our customers an average of £2,880 on a £35,000 loan.
What should I consider before applying?
Before applying, you should carefully consider how much money you need to borrow and your ability to manage your monthly repayments.
Also consider the following:
- Fixed rates vs variable rates – fixed rates give you certainty that your monthly payments won’t change for a set period, whereas when borrowing at variable rates, your monthly outgoings may go up if there are rate rises.
- How much you need to borrow – subject to lending limited, you can borrow up to £500,000. Consider the fact that the more you borrow, the more your payments will be, putting pressure on your finances. If you want to check your likely monthly costs, use a secured loan calculator to check your potential monthly repayments.
What interest rate should I expect to pay?
Secured loan rates start from 5.5-6%.
The interest rate that you pay will depend on your credit history, property value, loan to value (LTV) and ability to meet lender affordability assessments.
The interest rate charged will also depend on whether you prefer fixed rates or variable rates.
To accurately compare the costs between different products, check the APRC as this will give you interest rate plus any mandatory fees, so it can give you a better idea of the full cost of the loan. The higher the APRC, the higher the total cost of your loan.
The final point that has a big impact on secured loan rates is LTV. LTV, or loan-to-value is the difference between your total borrowing and the value of your property. Generally speaking, the higher the LTV of your loan, the higher your interest rate will be.
The maximum LTV on secured loans is currently 95%.
Is this type of loan right for me?
If you’re looking to raise funds using your property as security to borrow a larger amount or extend your loan term then a secured loan is likely to be the best product for you. Talk to our team of experts to find out more and we will offer free, personalised advice on whether it would be a good fit based on your circumstances.
Will I be eligible?
If you own your property, have sufficient equity and the financial ability to manage your loans monthly repayments, there is a good chance that you will be eligible to borrow money using a secured loan.
As we work with lenders from across the market, we can meet the borrowing needs of most applicants, no matter their individual circumstances.
Subject to an affordability assessment, application form, credit check and income assessment, we can work with a range of potential borrowers including self-employed applicants, retired applicants, those with bad credit (or a low credit score) or those needing to stretch affordability rules to consolidate debts.
Will I be eligible if I have bad credit or a low credit score?
Yes, you can still be eligible for a secured homeowner loan if you have bad credit such as a low credit score, CCJs, defaults, a previous IVA or bankruptcy or even historic mortgage arrears.
As the lender has security over your asset, the lending criteria tends to be more relaxed, as long as you have sufficient equity and meet the lender’s other criteria.
We even offer a range of specialist bad credit loans for this purpose – bad credit secured loans.
How can I find the best home loan deal?
In the UK, the easiest way to find the best deal is by using a secured loan broker.
A good broker will understand your needs and then compare secured loan offers from trusted lenders from across the market to find the best fit for your needs, whether that’s the lowest rate, highest loan amount or the ability to complete your application quickly.
Should you choose to apply to lenders directly, you could, of course, compare loans yourself However, you would then be left to handle the application process on your own and you may find that some lenders won’t work directly with the public.
To find out more, read how to get a secured loan.
What is the application process?
When you apply, the process is simple and can be completed, and the funds in your account as a lump sum in as just a few days. The process is as follows:
- Understanding your monthly instalments – The first step is to use a secured loan calculator to understand the perfect lump sum, loan term and interest rate that you can comfortably afford.
- Talk to a broker – A good secured loan broker will offer a quote, and explain the interest rate, potential fees and interest type, such as fixed rate, variable or tracker. If you’re happy with the quote, they’ll arrange a decision in principle to ensure your application is likely to be approved. This process takes just a few hours.
- Talk to your current mortgage lender – Talk to your mortgage lender to find out your outstanding balance. Where possible, get an up to date mortgage statement.
- Submit your application – Your broker will fill out the forms and get together any required info, such as proof of income, proof of ID and address and potentially bank statements. The lender will then assess the documents and if they’re happy will issue a formal offer.
- Your loan is complete – Once you sign and return your offer, the loan application process is complete and you will receive your loan funds, usually as a lump sum into your bank account.
Do I need consent from my existing mortgage lender?
In most cases, you will need consent to a second charge from your mortgage lender. Some loans can be taken without the need for consent, however, this may restrict which lenders you can apply to for credit.
What documents will I have to provide when I apply?
When applying for a secured loan, you will usually be expected to provide the following:
- A fully completed application form
- Proof of ID and residence for your current home address
- Proof of income (payslips for employed borrowers)
- 3 months bank statements
- A mortgage statement showing how much money you owe (ideally, not always required)
If you’re unable to provide any of these items, let us know and we’ll be happy to advise on whether a lender would be happy to proceed without the missing item.
What are they used for?
Secured loans are used to release money from the equity from your property, often to fund:
- Home improvements
- Debt consolidation
- Business investment
- Funding large purchases
- Property investment
- School fees
While these are common uses, we can raise funds for almost any purpose.
Why choose ABC Finance?
At ABC Finance, we offer exceptional service with a market leading, fixed £1,495 broker fee to help save our clients money.
We’re not just focused on finding you the best deal on secured loans while charging you a high fee for our service, we go the extra mile to save you more.
Once we’ve found the best deal, with the lowest APRC, we then handle the whole application process for you, whether that’s filling in an application form, checking proof of income or chasing the lender on your behalf to speed up your application.
What are the alternatives to secured loans?
The alternatives to a secured homeowner loan are:
Bridging loans – Bridging loans are an excellent option when funds are needed quickly for a period of up to 12 months. These loans are short-term and are also secured against your home or another property.
Unsecured loan – An unsecured personal loan allows you to borrow money without using your home as security. These loans are a good option for borrowing small amounts (up to £25,000), although they come with a short term (usually up to 5 years), which means the monthly repayments will be higher.
Remortgaging – Refinancing your mortgage to a new lender may allow you to borrow more money. When considering a remortgage, consider the impact of any early repayment charges, or penalties for switching. If you’re locked in to a low mortgage rate, switching to a new lender to raise money may not be a good option.
Interest-free credit card – An interest free credit card can be used to fund a big one-off purchase while offering a 0% interest period. Just make sure to repay the debt or switch to a new 0% deal before the end of the introductory period. Credit cards are easy to apply for and allow you to raise money quickly, but you may struggle to qualify if you have bad credit or a low credit score.
Peer to peer (P2P) loan – Peer to peer loans are unsecured loans that are funded by pooling funds from a collection of individuals. They offer a solid alternative to loans offered by banks and building societies for those looking to apply to borrow money without impacting their mortgage.
Guarantor loan – A guarantor loan allows you to take a loan guaranteed by a family member or friend. They legally promise to pay back the debt if you can’t. These loans are popular with borrowers with a poor credit history or low credit score who may otherwise fail to meet the criteria for unsecured borrowing.
Frequently Asked Questions
Can I pay off this type of borrowing early?
Yes, you can repay these loans early, although depending on the deal you’ve taken, this could result in early repayment charges.
If you think you may choose to repay within a certain time period, we can help you to select a product that has no early repayment charges, or exit penalties for paying off your loan early. Whatever your need, we can tailor our search to only compare secured loans that are suitable for your circumstances.
Are secured loans easier to get?
Yes, secured loans are easier to get than unsecured loans as the lender has collateral to protect their funds.
For this reason, you don’t need a perfect credit history or high credit score to get a secured a loan against your property.
How should I manage my borrowing?
The best way to manage your secured loan is to ensure you maintain the monthly payments. The best way to do this is to set up a direct debit or standing order to automatically make payments.
Beyond that, staying on top of when your fixed rate period ends and ensuring you meet your mortgage conditions, including ensuring your property is insured will make sure you remain popular with your lender.
Remember to check your credit report regularly to ensure it’s accurate and up-to-date.
How much can I borrow with a secured loan?
With ABC Finance, you can borrow anything from £5,000 to £500,000 over a term of 5 to 35 years, depending on your age and ability to meet affordability rules.
If you would like personalised advice on how much money you can borrow alongside your mortgage, get in touch today and our team of experts will provide a written quote within an hour.
Do secured loans require collateral/security such as my home?
Yes, to take out this type of loan, you must offer security over a property – either your home or an investment property.
If you’re unable to offer the required collateral, you should consider unsecured credit to finance your requirements.
What can be used as security or collateral for secured lending?
Secured loans require a property or land to be used as security.
Other security types, such as cars, investment portfolios or equipment may be suitable collateral for other types of specialist finance.
Can I apply for this type of credit if I’m retired?
Yes, you can apply even if you’re retired. In this situation, your ability to make repayments will still be checked using an affordability assessment.
Acceptable income types for this situation tend to be pension income, property investment income or income from self-employment.
Can I apply if I’m self-employed?
Yes, self-employed borrowers can apply for secured lending. In fact, this is a common use for these loans and is welcomed by most lenders.
Income assessment is usually handled through either an accountants reference or your tax return and tax overviews (usually for the latest 2 years).
What are the main types of secured loans?
The main types are secured homeowner loans and secured business loans.
Secured homeowner loans are made up of debt consolidation loans, home improvement loans and use your home as security for debt that you require for personal expenditure.
Secured business loans are used to fund business expenses such as business expansion, investment in a business or funds to start a business.
What types of interest rate are available?
We can offer both fixed rates and variable rate loans, depending on which interest type is best suited to your needs.
While fixed rates offer certainty over your monthly repayments and total cost of the loan during the fixed rate period, in some cases, fixed interest rates may be higher.
Equally, variable interest rates may be lower, but leave you exposed to rate rises, should they occur.
Which secured loan lenders do you work with?
At ABC Finance, we work with the leading lenders in the market including Norton Finance, Equifinance, Tandem Bank, Together Money and United Trust Bank.
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 £1,495 (added to the loan) would be £29,770.80. For comparison the overall cost would be 7.2% APRC representative.
