Bad Credit Secured Loan Articles

There are secured loan products available within the UK to suit all circumstances, including applicants with a bad credit history. A secured loan or second charge works in a similar way to a mortgage. Finance is arranged for the homeowner and secured against the value of the property in addition to the existing mortgage account. The loan is separate from the mortgage, and can be arranged on different terms depending on the borrowers' circumstances and requirements.

For applicants with bad credit, the criterion for borrowing is usually restricted although there are still many competitive products available from the numerous secured loan lenders within the UK. The lender will assess the borrowers' credit profile, taking into account arrears, payment defaults and any CCJs that the borrower has accrued. The amount of existing debt will also be taken into account when lending decisions are made. The restricted secured loan products available reflect the fact that borrowers with a bad credit history are classed as a higher risk for the lender.

Secured loan products available for applicants with a bad credit history typically have a higher rate of interest associated with them. There may also be a restriction on the amount available to borrow, or the calculation of LTV (loan to value of existing equity in the property). Secured loan lenders of sub-prime products will also tend to be a lot more cautious in ensuring that the processing of the case is done in the most efficient manner possible.

There are many advantages for an applicant with a bad credit history choosing a secured loan over a remortgage or further advance. One of these is that the outstanding amount on the main mortgage account is protected from being exposed to a higher rate, particularly if the existing mortgage is fixed at a competitive interest rate. A secured loan can also be paid off in a shorter period of time than the main mortgage account, which will allow the borrower to avoid exposing the entire remaining term of their mortgage to a higher rate of interest. If the additional finance is for debt consolidation purposes, providing that repayments are met over the term of the secured loan, a borrower can potentially correct their bad credit.

Secured loans for borrowers with bad credit are typically available over terms from 5 - 25 years, and at rates beginning at around 9.8% APR. A lot of secured loan lenders will accept one or two defaulted payments onto what is still considered to be a prime borrowing product. Sub-prime lenders can accept borrowers with a large number of arrears onto secured loan plans, although the more arrears a borrower has, the tighter the restrictions on LTV calculations and the higher the interest rates tend to be.

Any applicant with bad credit looking to apply for a secured loan should ensure that their provider researches a whole-of-market panel of lenders to ensure that they are being offered the most competitive product available to suit their circumstances.

Bad Credit Secured Loan Articles