What are secured loans?
A secured loan is where a secondary lender takes a legal charge over the property, added on top of a first charge (usually a primary mortgage).
This will be riskier than a first charge as the lender will be second in the queue if the house is repossessed – if there is nothing left then they wouldn’t get anything back.
Because of this higher risk rates are typically much higher than a standard mortgage but there are some instances when they may be a suitable option.
Secured loans can be very fast to set up, usually within a few weeks and sometimes much sooner. Therefore, if the money is required quickly a secured loan can be a great option.
If you are struggling to demonstrate the required income for a first charge lender a second charge may be appropriate. Mortgage lenders will require 1 year’s income for a self-employed applicant as an absolute minimum but second charge lenders will typically be more flexible and can use business turnover.
Secured loans may be available for a higher loan to value than your current mortgage lender is able to offer and also may be more willing to accept adverse credit issues.
Secured loans have a part to play but shouldn’t be the first port of call for additional borrowing.