What we cover in this article:
What is a secured loan?
A secured loan is a specialist form of lending, open to anybody that can guarantee their borrowing against an asset. The most common kind of secured loan involves borrowing a sum of money against the equity in your home, but other types of assets may also be possible. If you have an expensive car, or an art or jewellery collection, some lenders will also accept these forms of collateral.
The amount of money you can borrow on a secured loan is usually much higher than with an unsecured loan, If you have sufficient equity in your property. Most lenders will allow you to borrow up to 80% – sometimes as much as 90% – of your property value, minus your existing mortgage.
If your application for a secured loan is approved, you must make repayments on a contracted date each month. If you fail to make these payments, your asset is at risk of repossession.
With this risk, why would people choose to take out a secured loan? One reason is that secured lending is usually offered at a lower interest rate than an unsecured loan. The loan term can also be longer – depending on your age, you may be able to repay a secured loan for as long as 30 years. Finally, some people consider secured loans because they have no other choice. Unlike unsecured borrowing, these lines of credit can be opened up to borrowers with a poor credit history.
Read more – bad credit secured loans
Can I get a secured loan with a County Court Judgement (CCJ)?
Yes, you can get a secured loan with a county court judgement (CCJ).
A CCJ will often result in a blanket rejection whenever you apply for an unsecured line of credit. Secured loans are a different story. As they come with a measure of security for your lender, having a CCJ is not necessarily an automatic barrier to getting a secured loan.
You can even get a secured loan with an unsatisfied CCJ – some lenders will allow you to borrow enough to pay this debt and borrow more on top – if you have sufficient equity in your property. If you have settled the matter, and the CCJ is on your report in name only, you’re less likely to struggle with a successful secured loan application.
Just because you can get a secured loan with a CCJ does not mean the issue can be swept under the rug and ignored. Your lender will want to know how, when, and why the CCJ arose. Ensure that you have a satisfactory answer to these questions, and more importantly, be prepared to explain why you are confident that history will not repeat itself.
How to get a loan with a CCJ
If you are looking for a secured loan with a CCJ, follow these steps.
- Discuss your plans with your mortgage lender (if applicable) and ensure they will give consent to a second charge. Remember that placing a property up as collateral for a loan is not only a risk to you – your mortgage lender also has a stake in the asset.
- Consider how much you will need to borrow and for how long. Use a secured loan calculator to get an idea of how much your monthly repayments may be so you can start budgeting.
- Conduct basic research into loans available to you (do not make any applications at this stage!) or, better yet, approach brokers that can handle the application for you. You’re always welcome to contact ABC Finance and discuss your needs with our team.
- Identify the ideal lender for your needs and start the application process.
Once you start the process, you will be asked to provide your lender with various documents. These will include proof of ID and address, evidence that you own your home, and several months of bank statements that shine a light on your regular incoming and outgoings.
You’ll also be asked a range of questions about your financial past, present and projected future. As a secured loan with a CCJ is a higher risk than one without, you’ll need to be open and honest about your previous money worries. Do not try to hide anything from your lender or minimise your issues. The more honest you are, the faster the process will complete.
Overall, it usually takes one to three weeks to complete the application process for a secured loan and receive your money from the lender.
How can I get a better deal on a secured loan if I have a CCJ?
Finding secured loans with a CCJ looks easy on paper, with a simple Google search throwing up a raft of potential lenders. Some of these options will be offering high interest rates. You must take the time to find the best deal for your needs.
Some lenders specialise in secured loans with CCJs, or other significant adverse credit incidents such as IVAs and bankruptcies. These are the lenders that you should approach, as they will under the nuances required to gain access to this line of credit.
If you have any doubt about finding the best deal for a secured loan with a CCJ on your credit file and a low credit score, approach a secured loan broker. A financial professional will discuss your options and circumstances with you, managing the application process to enhance your chances of success. In addition, brokers can typically unlock deals and interest rates that you would not otherwise have access to.
Can a secured loan improve my credit rating?
If you have a CCJ against your name, your credit rating will suffer quite substantially. Your credit score may drop by as much as 250 points, which means you’re unlikely to rise above a Fair rating at best. CCJs remain on a credit report for six years and will always raise questions – while many unsecured lenders will not agree to work with borrowers with a CCJ on their record.
If you successfully apply for a secured loan, your credit score can slowly repair – even while the CCJ remains on your file. Making regular repayments on a secured loan will enhance your credit rating in several ways.
- Making monthly repayments on time, without experiencing further financial difficulty, assures lenders that you can be a responsible borrower.
- Your credit utilisation will drop substantially if you use a secured loan to pay off multiple unsecured debts.
- Some lenders look at affordability over credit score when deciding whether to offer a line of credit. Even if it’s large, one monthly repayment is widely considered more affordable than multiple smaller repayments.
Just be warned – your credit score will take a short-term hit when you apply for a secured loan, regardless of whether you are successful. A lender will perform a “hard search” on your credit file, which will cost you points.
Hard searches usually drop off a credit report after about three months, but avoid arranging more than one during this period, where possible. In addition to the impact on your credit score, multiple hard searches in a short time can make lenders nervous as it looks like you are relying on credit to make ends meet.
Do CCJ loans cost more?
As discussed, it’s typically easier to get a secured loan with a CCJ than to be approved for an unsecured loan. However, your lender will still be a little more cautious about lending to you. This will be reflected in the interest rate that you are offered. Just because a lender can take you to court and get their money back, it doesn’t mean they want to.
If you have a CCJ, your secured loan will likely come with a higher interest rate than somebody without this adverse credit history. How much depends on various factors – including how long ago the CCJ was filed, how you have been managing your finances since, and the lender’s unique policies. A business that specialises in loans for customers with adverse credit is likelier to offer a desirable interest rate than a more mainstream lender.
When you’re offered a secured loan with a CCJ, consider if the interest rate is reasonable and, more importantly, affordable. You can reduce how much you pay monthly by extending the loan period, but this will mean you pay more overall.
For example, let’s review a £50,000 loan offered at an 8% interest rate over 10, 15 and 20 years.
|Repayment Term||Monthly Repayment||Total Repayable|
|10 years||£599.29||£71,924.52, so the loan costs £21, 924.52|
|15 years||£469.80||£84,564.64, so the loan costs £34,564.64|
|20 years||£409.58||£98,298.03, so the loan costs £48,298.02|
Weigh up the commitment of monthly repayments against how much you are prepared to pay overall when deciding on the best options pertaining to a secured loan with a CCJ.
Should I use a broker or approach a lender directly?
If you are looking for secured loans with a CCJ on your record, it’s always advisable to use a specialist secured loan broker to find you the best deal. All secured loans are complex, and obtaining such a line of credit with a CCJ is even more challenging. As discussed, brokers also have access to opportunities unavailable to the general public.
When working with brokers, one thing to be aware of is the professional fees that will be levied. Many brokers charge a percentage of the sum you borrow, sometimes as much as 12.5%. If you borrow £50,000, you could be looking at an extra £6,250 added to your debt.
Shop around and make enquiries with multiple brokers, ensuring they specialise in helping borrowers with CCJs. Discuss the fees your potential broker will charge, ensuring they are affordable – and be sure to include ABC Finance in your options. Our friendly team is experienced in aiding clients with an adverse credit history, and unlike many brokers, we charge a flat rate of just £1,495 – no matter how much you need to borrow. Get in touch to learn more about how ABC Finance can help you find a secured loan with a CCJ.