Secured Loans
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Secured Loans
If you’re a homeowner, you could borrow against your property with a secured loan. Usually you will find lower interest rates on secured borrowing than an unsecured loan. The Mortgage Mum Specialist Finance team can help you to understand your options and get the best loan for your circumstances.
What is meant by secured loans? How do they work?
A ‘secured’ loan refers to a type of borrowing where you put up property or possessions as security. In most cases, people borrow against a property, but it is possible to secure the loan on another asset such as a car or valuable jewellery.
It can be a cheaper way to borrow money than an unsecured loan, but there is more risk. If you can’t repay the debt, the lender could repossess your home or seize the items used for security.
How much could I borrow?
Typically, secured loans are for a fairly large amount of money. It’s possible to find unsecured loans for up to £25,000, but to borrow more than this you will usually need a secured loan. Some loan providers offer up to £500,000, depending on your circumstances.
The repayment term can often be longer with a secured loan, too. You could repay the debt over 25 to 30 years. As with any borrowing, however, you will pay back more than you borrowed. The longer the term, the more interest you will pay.
What criteria do I need to meet?
Criteria will vary from lender to lender, but generally you will need to own a home and the provider will check your credit score. If your credit is less than perfect, it’s often easier to get a secured loan than unsecured borrowing.
Does a secured loan hurt your credit?
Provided you meet all your loan payments on time, the loan could improve your credit score. The only risk to your credit profile is if you apply to a number of loan providers, as each lender will do a hard credit check in assessing your application.
It is helpful to work with a broker so that you don’t apply for loans where you won’t meet the required criteria.
Speak to an expert
We will work at times that suit you and your family, carrying out appointments via video call, telephone or email, giving you the benefit of first class service, around your own schedule, and in the comfort of your own home. So let us handle your mortgage today and find out how well we can look after you, The Mortgage Mum way!
Is it better to get a secured loan or to remortgage?
Secured loans tend to have higher interest rates than mortgages, which is why people often choose to remortgage and release equity from their home.
But in some situations a remortgage doesn’t make financial sense – for example if you are currently on a fixed deal with a high early repayment fee. Or, you may not have the level of equity or affordability you need to achieve your plans.
The right decision will depend on your specific situation, so seek advice from a qualified advisor.
Can I pay off a secured loan early?
When setting up a secured loan it is important to know how you will repay it. Keeping the loan long term can be costly, so you may wish to consider early repayment using a regular bonus, windfall or upon your next remortgage.
Some lenders may apply an early repayment charge, however. If you think it’s likely that you could repay the borrowing ahead of time, we can work with you to find a lender that won’t charge a fee.
What are the advantages and disadvantages of a secured loan?
The main advantages of a secured loan are that they are relatively easy to get and could allow you to borrow a large sum. They are often used for home improvements or debt consolidation.
Secured loans have lower interest rates than personal loans, credit cards or other unsecured borrowing – but these generally aren’t as low as with mortgages. Because you can repay the loan over a long time, the repayments could be lower than with shorter term borrowing. Remember, though, that the longer your loan, the more interest you will pay.
The biggest disadvantage of secured loans is that they put your home at risk. If you are unable to pay, the lender could potentially repossess your property to recover their money. You need to be very confident that you can afford the loan.
We can also help you to review your protection products to cover your income if anything unexpected happens, such as illness or injury, to ensure you can meet your monthly payments ongoing.
How can a mortgage broker help?
If you’re considering taking out a secured loan, come and have a chat with a broker from The Mortgage Mum Specialist Finance. We’ll spend time understanding the whole situation, so that we can advise you whether there may be a different way to achieve your goals.
If an unsecured loan is the right decision for your specific circumstances, we’ll help you identify a suitable lender and work out the most affordable loan amount and repayment term. We’ll also make sure you understand all the pros and cons of this type of borrowing before you make a final decision. Contact us today for an initial, no-obligation chat.
