What is a secured loan?
This is a loan where there is a charge placed upon your property, so in the event that you do not make the required monthly payments, the lender could potentially repossess your home. It is important that you consider the implications of having a secured borrowing and fully understand the product.
What documents do I need for a loan of this type?
Standard documents required are proof of Identity (Passport or Driving License), proof of residence (Council Tax statement or Utility Bill statement), proof of income (last 3 month’s payslips or your tax return). Additionally, lenders may ask you for your last 3 months bank statements in certain circumstances. A property valuation will always need to be done and this could be in the form of an online valuation, a drive-by valuation or a full property inspection. The lender always has the right to ask for any documents it deems necessary for the application.
How does this loan work?
A secured borrowing typically takes 4-6 weeks to set up. This is a loan secured against your property, so be aware, that if you fail to make the monthly payments your home could be repossessed. A loan charge is recorded at the land registry and effectively sits behind your mortgage lender.
Does a loan affect remortgaging?
It may do, so you should seek advice in this area with a mortgage & loan broker, who can advise on a re-mortgage or secured borrowing option. It could cause an issue if you plan to remortgage and consolidate the secured loan in the future where the overall secured borrowing is more than 4.5x your income.
Do banks offer this loan?
Your existing mortgage lender could offer you an additional loan secured against your property as a further advance. Generally these loans are offered by lenders through mortgage and loan brokers.
Is a credit card, student loan or car loan secured or unsecured?
A credit card, student &/or a car loan is not secured against your property, so in the event that you do not make payments and fall into arrears or even default, the lender cannot threaten to repossess your home.
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DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.