So You Need A Fast Loan? Don't Go Rushing In
What is a fast loan?
The worrying thing about a fast loan is that it can mean a number of different things. Whereas a fast loan could refer to a personal loan, which is repayable every month but has nothing to do with your home, if a fast loan is for borrowing of £25,000 or more, it can also mean a secured loan which is a far more serious matter.
Any secured borrowing, even if it is a fast loan, is also sometimes referred to as a second charge loan. Although it is not a mortgage, a secured fast loan amounts to the same thing, in that if you default on repayments, your home is at risk and could be repossessed by the fast loan provider. By contrast, if you default on payments on an unsecured fast loan, although your credit rating will be damaged, your home is left alone.
Do many people take a fast loan?
More people than ever apply for a fast loan. This is because to qualify for a secured fast loan you will need to be a homeowner with equity in your property that is worth something to the lender should you default on payments. And because the value of a UK home has increased by an enormous 179 per cent in the last 10 years - from £70,000 at the end to 1997 to £195,000 today, according Halifax - a record number of people now have this equity and are in the position to apply for a fast loan.
What are the benefits of taking a fast loan that is secured on your home?
A fast loan that is secured on your home can get you money a lot quicker than taking a further advance or remortgage with your lender - and this can be invaluable in an emergency or life-altering event like divorce or family illness.
But even if this is not the case, a fast loan that is secured may also be a homeowner's only option. For example, your circumstances have changed since you were initially granted your mortgage - such as becoming self-employed and making a short-term loss in salary - and, while a fast loan provider is willing to lend, your existing mortgage provider is not.
A fast loan could also just be a cheaper option if your mortgage is subject to tie-ins which, if broken, could result in very hefty early repayment charges.
What are the downsides of fast loan?
A fast loan however, is often the point of last resort. This is because the interest rate payable on a fast loan is usually a lot higher than on a standard mortgage. And of course, if you cannot keep up these higher repayments, your home is at risk. Rates on a fast loan are also likely to be variable meaning they can go up at any time.
Secondly, while a fast loan below £25,000 is regulated by the Consumer Credit Act (CCA), a fast loan for over this amount is currently without regulation, meaning you will have limited recourse if you are unhappy with your fast loan provider.
What should I do before I apply for a fast loan?
An expensive fast loan that is secured against your home - and that may come with tie-ins - may also not be the best solution for your circumstances. This is why it is crucial to seek advice first from professionals that specialise in the fast loan arena like the Secured Loan Centre.
