Warr & Co Chartered Accountants - Article - An Insight Into Secured Loans

There are many ways in which we assist clients in raising finance to fund their financial goals and objectives, whatever they may be.

Often a conventional mortgage, be it a remortgage of an existing facility or further advance from a current lender, can prove to be a more than satisfactory solution.

However, there are many occasions where we may resort to secured loans to provide the necessary funding for a client’s purpose.

What Is A Secured Loan?

Secured loans are in essence loans secured on property, much in the same way as a mortgage. Secured loans require no up front survey, legal or other fees and are generally available for any purpose. The lender takes a second charge on a property, with the existing mortgage lender always taking the first legal charge on the security.

Purpose Of A Secured Loan

Secured loans can be used for a variety of reasons, such as: -

Debt Consolidation

Home Improvements

Holiday Homes

Payment of Tax Bills

Business Purposes

Reasons Why A Secured Loan

There are many occasions where a secured loan would be more appropriate than a mortgage. Here are a few reasons why someone might consider a secured loan: -

Unable to satisfy income multipliers or affordability of existing lender and redemption penalties prevent or deter consideration of alternative lenders

Unable to prove income since mortgage inception – self certification interest rate loading need only apply to additional borrowings

Adverse credit record since mortgage inception – interest rate loading need only apply to additional borrowings

Raising capital to avoid accumulating mortgage arrears – Good conduct of a mortgage for at least 12 months is a cornerstone of an individual’s credit record and fundamental to achieving sensible interest rates going forward

Limited equity in property or existing lender’s criteria does not permit release of equity to level desired

Lender will not grant additional borrowings for the purpose needed

Client cannot provide planning consents or invoices for home improvements

A personal loan is either uncompetitive or unable to provide the entire funding that is required. Equally, it may not be possible to arrange over an elongated term

Additional borrowing required either on buy to let investment property or on properties within 6 months of existing mortgage completion

Speed is of the essence – if the need to raise funds is time sensitive, a secured loan can sometimes be much quicker

It is fair to say that given the recent credit crunch, the number of lenders in this market has significantly reduced and those that remain are becoming more diligent in regards to the clients they offer terms to.

However, it is still important when approaching any lender to be confident that you are being offered the best terms for your particular situation. Via a range of packagers, Warr & Co retains access to a wide range of lenders and can offer clients confidence that the best terms are being sourced to satisfy their requirements based upon their circumstances.

Of course, where the nature of the funding required is more business-orientated, it may be that we resort to commercial lending. This too is an area with which we can gladly assist.

For more information on our services, feel free to take a look at the mortgage planning and commercial loan sections of our website. Alternatively, if you would like us to contact you about your specific requirements, email us with a brief note of your enquiry and suitable contact details. Once we have discussed your circumstances more fully, we will be able to provide an indication of terms shortly thereafter.

Think carefully before securing debts against your property. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Date of Article: 28th January 2008

Tim Warr - Warr on...