What Should You Expect From Secured Loans?
Secured loans are a product that allows borrowers to access equity that would otherwise be tied up in their property until they sold it. The secured loans provider will lend a sum of money on the basis that the debt is secured against your home. This means that if you default on your repayments the provider has the right to repossess your property to regain its money.
In return for having this safety netting the secured loans provider will lend you a small or large sum of money at a competitive rate and it will allow you to choose a short or long term of repayment, often much longer than a personal unsecured loan provider would offer you.
Secured loans are much more like a mortgage, which is also secured against your property. But because it is likely that you already have a mortgage if you are a homeowner, secured loans are also known as a second mortgage or second charge mortgage.
But if secured loans are so much like a mortgage, why not just take out a bigger mortgage to release the equity tied up in your property? In other words remortgage. This is an option for some people but it doesn't suit everyone.
How Long Will It Take?
Perhaps you need the money extremely quickly. While remortgaging may take weeks to complete, secured loans can be arranged in days. Also a remortgage covers your total mortgage debt and so may have to be arranged over a long term. But what if you want to borrow an amount and pay it back over a shorter time period, separately to your mortgage? A second charge mortgage would allow you to do this.
Also secured loans might be necessary if you are tied into a fixed rate on your mortgage that would cost you thousands of pounds to get out of. If you have a couple of years left on a five-year fixed rate, for example, it might make financial sense to take out a separate loan rather than to pay Early Repayment Charges to your lender in order to remortgage.
And finally, your lender may not allow you to remortgage to a mainstream rate because you have missed one or two payments and it considers you a bad credit risk. In this case secured loans could be the right option for you to take.
