12 Month Loans Result

A Guide To 12 Month Loans – Getting The Best Deal

A 12-month loan makes it easier for individuals to access funds regardless of a bad credit record. Lenders can provide funds as part of a secured or unsecured loan. Applicants with a poor credit history are given an opportunity to invite a guarantor, thus significantly improving chances of credit approval. It is possible to apply for a 12-month loan via the internet thereby eliminating hassles.

The concept originated in the United States and the United Kingdom. The loans are also referred to as payday loans and applicants can receive funds within 24 hours. This allows individuals to deal with emergencies requiring a substantial amount of money. The repayments are typically spread over 12 months, which mitigates the burden on the borrower.

Repaying the debt as scheduled makes it easier for borrowers to improve their credit record. Non-payment, on the other hand, can affect the borrower’s credit rating. If a guarantor co-signed the loan, they will be required to make payments on behalf of the debtor. It is possible for the guarantor to lose personal belongings if the debt is secured.

What are the key features of 12-month loans?

  • The loan amount can range between £200 and £5,000 depending on the lender
  • Repayable in 12 months
  • Lenders can accept applications from borrowers with bad credit history
  • The approval period is relatively short and the process can be handled online
  • No credit check
  • Available to individuals above the age of 18 with a regular income
  • No fees for missed payments or early repayment

Upon approval of the loan, the funds are deposited directly into the borrower’s bank account. The majority of payday loans are repaid in 12 equal monthly payments but the borrower can make specific arrangements with the lender.

Key benefits of 12-month payday loans

Borrowers can take advantage of these loans to bridge a gap following an unexpected event that requires additional funds. The loan amount is disbursed quickly allowing applicants to cover emergency expenses immediately. Anyone with a regular income can gain easy access to the loans via the internet or the lender’s offices.

Many direct lenders offer great deals on the loans through significantly lower interest rates when compared to other types of personal loans. When it comes to repayments, the lender does not automatically withdraw funds from the borrower’s bank account. This enables borrowers to repay the loan at a comfortable pace.

The popularity of the 12-month loans can be attributed to the various incentives offered by UK direct lenders. In most cases, the loan agreements require no guarantor. Credit unions, banks, and other financial services companies typically offer instalment and credit card loans that come with varying repayment periods. The duration ranges from 12 to 36 months. However, qualifying for a bank loan can be difficult, especially for borrowers with a poor credit history.

The loan application process for bank loans takes a considerable time and applicants are expected to submit a wide variety of paperwork. This in contrast to the paperless application processes associated with 12-month loans. Credit unions and banks often demand collateral or the involvement of a guarantor when a loan applicant has a poor credit rating.

Making the most of best loan deals

Applying for a 12-month loan is straightforward thanks to the minimum qualification requirements. Many lenders offer online loan calculators for added convenience. These tools are designed to help customers to determine the cost of the loan and the monthly repayment amount. This is aimed at making it easier to plan even before lodging a loan application.

Borrowers benefit from no fees for late payments. Reputable lenders provide detailed information about the loans and customers can expect no hidden fees. It is possible to repay the loan amount early or make a one-off payment. Some companies handle the loan application process within minutes and deposit funds into the borrower’s bank account in a matter of hours. It could take only one hour.

Lenders usually provide reliable customer service tools, including live chat, email, and access to a representative via phone. Credit and affordability checks can be carried out as part of responsible lending.

When you submit the loan application online, you can track the progress from any location. Additional tools provided by the loan companies are designed to make it easier to manage finances by simply logging in to your account. Lenders often send monthly reminders when the next payment is due.

What are the interest rates for 12-month loans

Interest rates are a key aspect of the 12-month loans that should not be taken for granted. Many lenders offer fixed interest rates, which enables borrowers to determine the cost of the debt and plan accordingly. The applicable rates are often linked to the risk levels presented by the borrower, especially individuals with a poor credit history. Hence, the lender mitigates the risk with significantly higher interest rates.

Each loan comes with an annual percentage rate (APR), which covers the costs of the loan. Repaying the debt over a lengthy period (12 months) can minimize the overall cost of the debt but it does not help reduce the monthly payments. For this reason, it is important to use a loan calculator to determine the monthly repayment amount. This provides a surefire way to formulate a viable budget.

What can I use a 12-month loan for?

Unlike home and car loans, borrowers do not face restrictions as regards the purpose of taking out the loan. This ensures maximum flexibility. The loan amount is repayable through auto debit facilities (balance transfer) and post-dated cheques. Borrowers can take advantage of these loans to deal with a variety of emergencies, including home repairs, replace a lost mobile device or handle a car breakdown.

This type of debt can act as a bridging loan when unexpected events cause financial havoc. However, many people take out a 12-month loan to provide funds for planned expenses like paying school fees, funding a home improvement project or engaging on a family vacation.

How do I find the right loan?

Choosing the ideal loan requires careful consideration. To make the right decision, borrowers need to consider a variety of factors, including the interest rate. Some companies offer comprehensive services, which incorporate financial products like life insurance through strategic partners. This is aimed at providing a one-stop shop for customers and awesome deals on loans.

Finding the right option is about picking a lender that offers the best deal that suits your unique financial situation. Doing so makes it easier to repay the funds without straining your budget. You should determine the amount required to cover current needs. Short-term loans are ideal when looking for a smaller amount. A 12-month loan is well suited to situations requiring a significant amount of money.

The amount you choose to borrow should not compromise your ability to cover basic living expenses, such as utility bills, grocery, and transport costs. A 12-month loan serves some individuals better than others since it is a long-term commitment. The longer repayment period requires a disciplined and well-planned approach.

The interest rates for 12-month loans have a distinct structure aimed at creating a balance between the lender’s and borrower’s needs.

Short Term Loans Result

A Guide To Short Term Loans

Any time a person borrows money there are a lot of variables that impact the experience.  Borrowers need to be aware of all the benefits and drawbacks to the different types of financial products available on the market today before they sign on the dotted line.

Depending on a person’s credit worthiness, terms of loans can be extremely manageable or a downright nightmare with no escape.

Typically, the financially unsophisticated are the ones who pay the highest price simply because they are unaware of what to look for.

We’ve produced a guide to short term loans to help borrowers understand common elements of available short-term borrowing opportunities.  In other words, people will learn what loans are good for them and which ones they should stay away from.

What is a short term loan?

The generally accepted definition of a short term loan is one that is required to be paid back in less than one year.  Pretty much any loan fitting that repayment schedule or with a shorter one, could be considered a short term loan.

These loans also typically have lower borrowing limit.  For example a common short term loan may be 6 — 12 months in length and be less than £5,000.

Sometimes 12 month loans may be greater than £5,000.

Other short term loans may only be 1 — 2 weeks in length and limits max out at £1,000.  These types of micro term loans are also known as pay day loans or pay day advances.

What Types of Short Term Loans are there?

There are a variety of structures for loans based on borrower demand.  Depending on a person’s immediate need for funds as well as their credit worthiness, there are different financial products available.

Bad Credit Loans

Some loans are marketed to those with less than perfect credit scores.  Bad credit loans are typically for smaller amounts and extremely short periods of time.  Instead of credit worthiness, lenders generally require pay stubs from a person’s job or permission to withdraw future payments from a person’s bank account.

Unsecured Loans

For those with slightly better credit, unsecured loans are an option.  These are loans don’t require collateral like a bank account, vehicle, or property.  They are extended based on the credit worthiness of the borrower.

Unsecured loans do have potentially higher interest rates than secured loans because they are riskier for the lender.  The interest rate you get however will depend largely on your credit position and the type of lender you go with.

Secured Loans

Secured loans are lines of credit secured by property.  Various types of property may be accepted but typically it’s a vehicle.  Payday advances are notorious for allowing borrowers to put up their car, truck, or motorcycle as collateral for a loan.

The caveat with secured loans is that if the borrower defaults on the loan, the lender can repossess the property.  In other words the lender can come and take the vehicle if the borrower doesn’t pay.

What is credit rating?

Your credit rating or credit score is sort of like a grade for your credit worthiness.  It tells lenders how likely you are to repay your loan.

Credit ratings are determined using a variety of information like your length of credit history, how many accounts you have open, how many late payments you’ve had in the past, and how much money you owe on your accounts among other metrics.

A low credit rating means you may be less likely to be granted a short term loan and if you are, the interest rate may be higher.  A credit rating that is higher can mean a greater likelihood of approval and lower interest rates on the money you borrow.

How do I apply for a short term loan?

The application process for most loans is pretty much the same.  The basic information that all lenders will ask for include name, address, phone number, email, employment information, and financial data.

Short term secured loans will ask for information about the property you are securing and most unsecured or more traditional short term loans will do some kind of credit check.

What are some things I should watch out for with short term loans?

Any time you borrow money you should be extra cautious about what you are getting.  Make sure you read the small print on any agreement and that you understand what is expected of you fully before you commit.

Also, be sure that you have the ability to pay the loan back with the interest that’s being charged.

With those two basic things in mind, here are some other elements of short term loans to consider.

Interest Rate

The interest rate is the amount of money you are being charged to borrow the money.  Typically, it is paid each time you make a payment on the principle balance of your loan.  It’s important to make sure you understand your interest rate and that it is at a level you can afford.

Some short-term payday advances for example can charge triple digit interest rates making it almost impossible to pay them back if the borrower goes past the initial period where the loan could have been paid back without interest charges.  Some lenders have even been known to charge 3000% interest rates.

Aside from Payday loans, short term loans in general may have higher interest rates because the lender has less time to make money over the life of the loan.

Penalties

Pay attention to the penalties that the lender is charging for things like starting the loan, accepting payment, or for late fees.  For short term, small loan amounts, these fees can easily wind up being more than the amount originally borrowed.

Do I need a co-signer for a short term loan?

Depending on the type of loan and your credit worthiness, you may or may not need a co-signer.  By definition, a co-signer assumes part of the responsibility for paying the loan back.  Some types of small loans do not require co-signers.

For instance loans that are secured with collateral may not require an extra person to sign an agreement.  Additionally, if a borrower has a favourable credit rating then co-signers are not necessary.

What if I have trouble paying my loan back?

Despite having the best of intentions, things happen, and people are unable to fulfil their credit obligations.

The worst possible thing you can do is avoid the issue and stop paying on your loan.  Delinquent loan marks on your credit report will hurt your ability to borrow in the future.  You may also incur additional interest and penalty charges for not paying on time.

The first thing you should do if you know you won’t be able to meet your scheduled monthly payments is to contact your lender and explain the situation.  Many lenders can offer help when there are open lines of communication between borrower and lender.

For instance, some lenders may offer short periods of deferment, refinancing, or even modify the loan. The chances of things like that happening are rare though.  Many lenders will not want to modify a contract and need all payments plus interest in full and on time.

Debt Consolidation Loans Result

A Guide To Debt Consolidation Loans

Debt consolidation may not seem practical for those with bad credit. However, it can help repay several high interest loans at a lower interest rate. Personal loans typically result from a specific purchase or are unallocated, such as loans from banks and credit institutions. Some of the loans are related to the use of credit cards.

Optimizing your budget can justify loan consolidation. The approach involves paying off loans in advance by means of a new loan. This offers the advantage, on the one hand, to simplify your budget and get better visibility since you have only one credit. On the other hand, it reduces your expenses, thanks to a lower interest rate.

You can also take advantage of an adjusted repayment period or reduced monthly payments. However, repaying the new loan over a longer period may mean more interest to pay, so a higher overall cost.

What is the role of debt consolidation lenders?

These lenders mainly focus on servicing bad credit based on consolidation conditions andoffer debt consolidation loans to those who have good credit scores. Signing up for a loan means that the lender settles all outstanding debts by leaving a single loan to be paid over an agreed period, at the agreed interest rate.

Choosing a reliable lender is important to avoid unfavourable terms. A credible lender typically has different debt consolidation loans to meet various needs. Borrowers must clearly understand the different options and compare the offers of different lenders before applying for the loan.

While it is true that reputable banks and credit unions are probably out of bounds for borrowers with lower credit scores, there are several other options. The key, however, is to select the right lender without just falling for low interest rates.

Banks and credit unions look at the credit score before approving the loan application for an unsecured personal loan (no collateral required), which can be used to consolidate debts. However, applicants with a bad credit score can qualify for the loan if they have a low level of indebtedness and a stable income to ensure regular repayments.

Credit Counsellors

Credit counselling companies help people with bad credit to find the best way to get rid of their debts. They can also help borrowers negotiate lower interest rates with existing lenders. Although most of these credit counselling agencies are not-for-profit, they are still likely to charge fees for their services. Again, due diligence is a must before resorting to counselling services.

Relief societies

On the other hand, debt relief companies do not offer debt consolidation loans, but they can help those with debts to effectively manage repayment or fully settle debt under negotiated terms or IVA (Individual Voluntary Arrangement). They achieve this objective through various ways, including:

Debt management plan helps pay debt in a systematic way and may include lower interest rates. Borrowers are guided on how they can prioritize spending and mobilize more funds to honour monthly repayments.
Debt settlement the last resort for those with bad credit is to settle debts as much as possible to avoid bankruptcy. Debtors are generally required to place a monthly payment with an escrow account while settlement service providers negotiate with lenders to arrive at the best discounted repayment options. The agreed amount is then released to the lenders.

Debt relief efforts are recommended if borrowers find it difficult to meet monthly repayment commitments. Professional intervention in such cases helps establish a win-win situation, which makes it easier for borrowers to streamline payments while ensuring that lenders can recover at least a portion of the loan amount.

Interest rates

While debt consolidation loans and personal loans are available to people with bad credit scores, it should be noted that they are not cheap. Based on the risk-based pricing method, the interest is high since there is no guarantee that the loan amount will be recovered thanks to the unsecured nature of these loans. Bad credit adds to the risk. In the case of loan offers with lower interest rates, borrowers must look for hidden costs that can add to the expense.

Paying pending credit card fees and other affordable fees goes a long way to improve credit ratings before applying for a debt consolidation loan. Just three months of regular repayments can help achieve this objective.

Debts eligible for consolidation loans

It is worth remembering that not all debts are eligible for consolidation loans. Current credits like revolving credit and store cards are not considered as debts. If you have unpaid monthly payments on these credits, the amount due will be a debt it will be included in your purchase of credits.

Some of the debts included in consolidation plans include:

An amount, which has gone beyond the overdraft limit allowed on your current account. An advance on wages, a deposit on a premium, an amount allocated by your employer. A family debt: it can be an amount loaned by a family member or a friend, you can integrate the amount of this debt in the new loan.

A tax or social debt: tax delays, inheritance rights, debts related to a divorce and social debts. In some cases, the consolidation may extend to rent delays if you are a tenant. Bailiff debts or moratorium: if you are late on your repayments or have agreed on a monthly payment (sometimes called moratorium). The bailiff will produce a mail with an order of amounts due.

For reputable institutions, the purpose of debt consolidation is not only to save the client money by consolidating all his debts into a single, lower-cost loan but also to make life easier. The approach allows debtors to avoid any oversights because they will be only one payment to make every month.

An individual with a total balance of £25,500 on two credit cards at a rate of 21.5 percent and pays only the minimum monthly amount required. If this debtor agrees to pay these debts on a term of 48 months – without making new purchases – the cost of credit will total £14,945.

The individual has the capacity to consolidate the debts by replacing them with an unsecured personal loan at a floating rate of 6.45 percent over a period of 48 months. Thus, the cost of credit over the period will be £5,811. The interest rate paid on the loan serves as a barometer.

Where to find a loan consolidation plans?

Some banks and institutions offer loans specifically dedicated to credit consolidations, some of which are limited (exclude some debts like revolving loans). Generally, any unaffected personal loan can be consolidated. Some banks only lend to their own customers or to someone who agrees to become a customer.

Before asking your bank about a potential loan consolidation, first consult other financial institutions. One of them may make you an interesting. Determining the amount of the loan repayment is simple: it is the total amount due on your outstanding credits, excluding any prepayment compensation.

Whatever the amount to borrow, ensure that your finances are healthy. Borrowers whose debt is out of proportion to resources or income and those who have low credits scores are almost always rejected by banks and conventional institutions. Only specialists from the credit union accept them under draconian conditions.

Moreover, given the limits on the amount and duration of consolidation loans, mortgages may not be applicable unless they have been specifically designed for this purpose.

Car Loans Result

A Quick Guide To That First Car Loan

In many ways, there has never been a better time to obtain a car loan. Even if you do not have the most sterling credit, manufacturers are all but desperate to keep product flowing through their sales channels.  This means that their dealer networks are being prodded to find buyers wherever and whenever they can. Yet many people are unaware of this opportunity or believe that they cannot qualify even though standards have loosened considerably.

Things Aren’t As Bad As You Think

Not only are there many people who do qualify but do not realize that they qualify, but there is also an even larger cadre of potential car buyers who are right on the cusp of qualifying under the currently loosened standards. For this latter group, a few small tweaks could get them into the contest, but they need to understand the rules of the loan qualification game to successfully play.

To begin with, it is important to understand that “no” does not always mean “not” but rather “no, we are not the ones who can give you a loan”. There are countless loan providers out there in the world, and they all make their livings by finding someone they can provide funding to. They have a direct incentive to say “yes” but the algorithmic gods must be propitiated first.

Know Your Own Situation Before You Shop

Start by having a look at your own credit report. This will provide you with two important bits of information. The first is your credit score– which is nothing more than a numerical assessment of whether you are a great credit risk, a good credit risk, or a poor credit risk.  Don’t be discouraged if you come back in the poor credit risk category. This is better news than having no previous credit at all. Those are the people which the companies are most reluctant to loan to.

The second bit of information is a listing of your accounts and payment history. It is very important that you examine this list closely. Errors are more frequent than you might suppose, and most of those errors are usually going to be against you. You might have open credit lines that are not listed.

You might have been flagged for late payments even though you have always been on time. Your identity might have been jacked and someone has been running up bills in your name and not making any payments at all. So have a careful look and make sure that you correct any inaccuracies. Merely by doing so, you may elevate your score enough to warrant consideration for a loan, or it may bump you up enough to make you eligible for more favourable terms.

Finding Your Niche In The Credit Market

Once you have done everything in your power to ascertain and improve your existing credit score, the time finally comes to look at what sort of car loans might be on offer. Narrow down the many potential lenders to a list that only contains those who cater to a clientele with the same sort of credit parameters as you personally have.

Run a quick Internet search for something along the lines of “car loans for xxx credit score”. This should produce a surprisingly large number of entities that want to do business with you.

Saying No To Yes

It is important to be persistent, however. Just because someone says yes to your application, you should not automatically jump on it. There may be others who will also approve your application and may offer superior terms. Indeed, there are many shops which throw out very unfavourable offers as soon as they receive an application and count upon that person snapping it up without doing any comparison shopping at all. You must have a little confidence and faith in yourself. You must also exercise a little patience.

Avoid Unrealistic Expectations

Another important point to keep in mind is the need to adjust your horizons a little bit. It is unlikely that you will be able to get terms on a Rolls or Lamborghini on your first go around. You will need to consider something a little more practical and affordable. It is even true that different manufacturers will have different criteria although they offer the same sort of vehicle in the same price range as someone else.

Newer brands often must provide far more generous terms than do old established ones. It is often the only way in which they can break into a new market. New car companies spell opportunity for those on the lower end of the credit rating spectrum.

Avoiding Financial Suicide

Another important part of the equation lies in figuring out how much you can afford to pay monthly. This should not be calculated on a maxed-out level but as a reasonable examination of what you can afford without getting yourself into trouble if something goes wrong on any month. You need a cushion, in other words.

A loan payment also does not put petrol in the tank or provide for other costs such as registration and insurance payments. These need to be deducted from any sum you may assume you are capable of handling– unless, of course, you expect to use your new car as a planter in the back garden rather than as necessary transportation.

It should also be kept in mind that you may be able to get by with a more-affordable used vehicle rather than chasing a new one. New vehicles are notorious for losing value from the moment you drive them off the lot. If your need is for basic transportation rather than prestige, a good clean used vehicle will cost less both in absolute terms as well as in monthly payments.

More importantly, getting car loans of any sort, no matter how humble a vehicle it may be, paves the way for better terms on a nicer car once you have proven yourself on this entry-level car loan.

Set Yourself Up For Round Two

In truth, everybody who is just starting out with a car loan is likely to be offered less favourable terms than for those who have been through the process more than once. Keeping your initial level of pain to the minimum will get you on the ladder up to the car you really want much faster than if you really load yourself up on your first purchase.

Many people who go for the best they can qualify for often find themselves in a situation that is known as being “under water”. This means that their car depreciates faster than the monthly payments reduce the balance owed and leaves them trapped in an aging vehicle or forced to pay off their existing car loan by rolling it into their new loan package.

Be Patient And Wise

To summarize, you must know yourself first. Find out what your credit score is and explore ways to improve it. Figure out your true price range and stick to it. Shop around for loans and vehicles that will fit into these constraints without leaving you at risk of financial destruction if things go west. Remember that your goal of this first car loan is to get your foot in the door. A car loan of any sort will improve your credit score and allow you to afford a much nicer one at better terms the second time you shop for one.

Home Improvement Loans Result

A Guide To Home Improvement Loans

Home improvement is an essential part of keeping property in good condition. However, raising the required finances to fund such a project can present quite a challenge. Keep in mind that some owners run busy schedules that hardly allow them to think about issues outside of their industries. Here is a guide to help just about anyone raise the finances they may need and how to manage the whole project to get desirable outcomes.

The benefits of home improvement

Property beauty

It is inevitable that after a while of existence any home is bound to lose its initial beauty. This may make it less desirable to people and as a result it may be difficult to sell or rent out.

Heightened comfort

The home is one of the places that you can go to relax and have a good time. Home improvement can be a quick way to ensure that this little paradise offers the comfort that is fitting for you and loved ones.

Increases space

The last thing you want is to live in a house that appears too crammed up with items. A few adjustments within the home may ensure that you create more space.

Adds value

A casual talk with any property dealer will reveal how important home improvement is before offering it up for sale. Indeed, homes that undergo renovations are likely to be valued highly when compared to those that have had no improvement.

Energy conservation

Some individuals opt to carry out home improvement to cut down on energy costs. Inclusion of glass windows or doors and installation of solar panels may be key to lighting the house naturally or powering several electronics. This can easily bring down the costs of electricity in the house.

Maintenance

Unless you carry out regular maintenance activities your home may not remain in good condition for long. Home improvements forestalls any major damages that may otherwise occur and lead to huge losses.

Planning your home improvement project

Once you have concluded that your home needs improvement you need to start planning. This may involve talking to experts in interior design or construction. Such people will give accurate estimations when it comes to the costs that will be incurred on required materials and services. At this stage you need to come up with a schedule for all activities and request written proposals from various service providers. It is also important for you to come up with a budget that will help you manage your finances in the right way.

Consider financing options

With a plan of action in place, the next thing to think about is the way you will be financing your project. There are a variety of options for you to choose from including:

Cash

This method requires you to use your savings or income to directly finance the project. Experts advise against this method because it may end up leaving you vulnerable since you may be unable to pay for medical or other needs if your savings are used up.

Credit cards

If your credit cards offer enough funds for financing the project you may go ahead and use it. The downside is that you are likely to have access to limited funds but still end up incurring a high amount with regards to the interest rates you are charged.

Home improvement loans

These are sometimes referred to as personal loans and can be sourced from many financial institutions.  It is worth pointing out that personal loans can be taken out for longer periods and provide higher amounts when compared to credit card limits. They are easy to apply for although they may attract high-interest rates depending on the financial institution you work with and various other factors including your credit scores.

Where to find personal loans for home improvement

Local banks

Most people that undertake home improvement projects prefer getting their personal loans from local banks. It is worth noting that individuals that hold active accounts in the banks they apply to are more likely to secure these loans. Before applying it is important for you to learn about the requirements or eligibility criteria.

Credit unions

Credit unions are legally formed financial cooperatives that are run democratically. They are owned by members who meet at given times to formulate policy. To secure a personal loan from such an institution one needs to be a member and meet the set eligibility criteria.

Peer to peer lending

This method requires you to submit your application to an investor who then accepts to finance your project if you can guarantee that you will pay the amount at an agreed interest rate.

Tips for securing a home improvement loan

Do your research

Before you apply to any of the institutions mentioned above it is important for you to do some research. Talk to people who have had the opportunity to improve their homes through loans. Such people could be friends, relatives or colleagues who can offer tips and tricks to use. They may also give recommendations regarding some of the best financial institutions to work with.

Learn about the eligibility criteria

There is no need for you to submit a loan application only for it to be turned down because you did not meet one or more of the requirements that are stipulated. Instead, take the time to examine each requirement and ascertain that you qualify for the loan.

Keep in mind that every time your loan application is rejected the result may reflect negatively on your credit score report. Most financial institutions require you to be of legal age, have documents showing that you are the owner of the home to be improved and have a track record of debt repayment.

Know the right amount to apply for

Most financial institutions will reject your application if the amount you are requesting is higher than your financial worth. In case you are unsure of the amount to request for it may be wise to seek expert help from a financial adviser. Such a professional can examine your worth and provide accurate recommendations on what you should do to secure the loan you need.

Manage your credit scores

Most financial institutions rely on your credit scores to evaluate if you are a good fit for a loan. To have a healthy credit score be sure to clear all balances on various credit cards. Avoid opening multiple credit cards because they tend to lower your ratings. It is also important for you to pay monthly bills on time. If you notice any errors on your credit report raise the issue with relevant authorities so that correction can be done immediately.

Do not apply for multiple loans

Most people make the mistake of submitting multiple applications to several institutions. You need to realize that financial institutions do their due diligence and in case they detect you have submitted other applications they are likely to decline your loan request.

Submit application according to instructions

Fill out any forms that you are presented with according to instructions. Always give accurate information and verify that all the details you have provided have no mistakes.

Compare Home Improvement Loans

A Guide To Home Improvement Loans

Home improvement is an essential part of keeping property in good condition. However, raising the required finances to fund such a project can present quite a challenge.

Keep in mind that some owners run busy schedules that hardly allow them to think about issues outside of their industries.

Here is a guide to help just about anyone raise the finances they may need and how to manage the whole project to get desirable outcomes.

The Benefits Of Home Improvement

  • Property Beauty

It is inevitable that after a while of existence any home is bound to lose its initial beauty. This may make it less desirable to people and as a result it may be difficult to sell or rent out.

  • Heightened Comfort

The home is one of the places that you can go to relax and have a good time. Home improvement can be a quick way to ensure that this little paradise offers the comfort that is fitting for you and loved ones.

  • Increases Space

The last thing you want is to live in a house that appears too crammed up with items. A few adjustments within the home may ensure that you create more space.

  • Adds Value

A casual talk with any property dealer will reveal how important home improvement is before offering it up for sale. Indeed, homes that undergo renovations are likely to be valued highly when compared to those that have had no improvement.

  • Energy Conservation

Some individuals opt to carry out home improvement to cut down on energy costs. Inclusion of glass windows or doors and installation of solar panels may be key to lighting the house naturally or powering several electronics. This can easily bring down the costs of electricity in the house.

  • Maintenance

Unless you carry out regular maintenance activities your home may not remain in good condition for long. Home improvements forestalls any major damages that may otherwise occur and lead to huge losses.

Planning Your Home Improvement Project

Once you have concluded that your home needs improvement you need to start planning.

This may involve talking to experts in interior design or construction. Such people will give accurate estimations when it comes to the costs that will be incurred on required materials and services.

At this stage you need to come up with a schedule for all activities and request written proposals from various service providers.

Its also important for you to come up with a budget that will help you manage your finances in the right way.

Consider Financing Options

With a plan of action in place, the next thing to think about is the way you will be financing your project. There are a variety of options for you to choose from including:

  • Cash

This method requires you to use your savings or income to directly finance the project. Experts advise against this method because it may end up leaving you vulnerable since you may be unable to pay for medical or other needs if your savings are used up.

  • Credit Cards

If your credit cards offer enough funds for financing the project you may go ahead and use it. The downside is that you are likely to have access to limited funds but still end up incurring a high amount with regards to the interest rates you are charged.

  • Home Improvement Loans

These are sometimes referred to as personal loans and can be sourced from many financial institutions.  It is worth pointing out that personal loans can be taken out for longer periods and provide higher amounts when compared to credit card limits.

They are easy to apply for although they may attract high-interest rates depending on the financial institution you work with and various other factors including your credit scores.

Where To Find Personal Loans For Home Improvement

  • Local Banks

Most people that undertake home improvement projects prefer getting their personal loans from local banks. It is worth noting that individuals that hold active accounts in the banks they apply to are more likely to secure these loans.

Before applying it is important for you to learn about the requirements or eligibility criteria.

  • Credit Unions

Credit unions are legally formed financial cooperatives that are run democratically. They are owned by members who meet at given times to formulate policy.

To secure a personal loan from such an institution one needs to be a member and meet the set eligibility criteria.

  • Peer to Peer Lending

This method requires you to submit your application to an investor who then accepts to finance your project if you can guarantee that you will pay the amount at an agreed interest rate.

Tips For Securing A Home Improvement Loan

  • Do Your Research

Before you apply to any of the institutions mentioned above it is important for you to do some research. Talk to people who have had the opportunity to improve their homes through loans.

Such people could be friends, relatives or colleagues who can offer tips and tricks to use. They may also give recommendations regarding some of the best financial institutions to work with.

  • Learn About The Eligibility Criteria

There is no need for you to submit a loan application only for it to be turned down because you did not meet one or more of the requirements that are stipulated.

Instead, take the time to examine each requirement and ascertain that you qualify for the loan.

Keep in mind that every time your loan application is rejected the result may reflect negatively on your credit score report.

Most financial institutions require you to be of legal age, have documents showing that you are the owner of the home to be improved and have a track record of debt repayment.

  • Know The Right Amount To Apply For

Most financial institutions will reject your application if the amount you are requesting is higher than your financial worth. In case you are unsure of the amount to request for it may be wise to seek expert help from a financial adviser.

Such a professional can examine your worth and provide accurate recommendations on what you should do to secure the loan you need.

  • Manage Your Credit Scores

Most financial institutions rely on your credit scores to evaluate if you are a good fit for a loan. To have a healthy credit score be sure to clear all balances on various credit cards.

Avoid opening multiple credit cards because they tend to lower your ratings.

It is also important for you to pay monthly bills on time.

If you notice any errors on your credit report raise the issue with relevant authorities so that correction can be done immediately.

  • Do Not Apply For Multiple Loans

Most people make the mistake of submitting multiple applications to several institutions.

You need to realize that financial institutions do their due diligence and in case they detect you have submitted other applications they are likely to decline your loan request.

  • Submit Application According To Instructions

Fill out any forms that you are presented with according to instructions. Always give accurate information and verify that all the details you have provided have no mistakes.

Bad Credit Loans Result

A Guide To Bad Credit Loans

All of us must borrow money every now and then, particularly right now when times are tough, however getting credit is not always a simple task. Nowadays, building societies and banks are selective about who they lend to, because they want to avoid bad debts that could harm their profits.

Your Credit File Information

A lender will consider many variables when assessing your loan application, however your credit file ranks among the most significant. The three major credit reference firms are Equifax, Experian and CallCredit – and these all have a copy of your file. This report has lots of data about your spending habits, such as your credit cards, mortgage and other types of loans.

After you submit your loan application, the building society or bank will look at the data in your credit file, as well as other details about your financial history, then assign a credit score to you. Unlike many people believe, credit blacklists do not exist, and you are not assigned one credit score. All lenders have different ways of working out a score, therefore you might be accepted for a loan by one bank and declined by another.

People Who Have Never Borrowed Before

Some lenders are reluctant to hand over money to first time borrowers. This might sound odd, however, new borrowers do not have a track record, either bad or good, which means it is hard for building societies and banks to determine their reliability. Therefore, do not be shocked if you discover that it is hard to access credit when you first apply.

How Your Score can be Damaged

Credit scores are used to gauge how creditworthy you are. In the past, if you have repaid your debts on time, you shouldn’t encounter any issues accessing credit in future. However, if you have a history of making late loan payments, or missing credit card payments, this will appear on your report and might negatively impact your credit score. Also, your credit score will suffer if you have experienced more severe financial problems, like a County Court Ruling or bankruptcy.

How Your Credit Score can be Improved

It is possible to raise your credit score in several ways. For instance, you ought to register to vote, and refrain from making multiple credit applications, because lenders tend to decline borrowers who have been denied credit previously. In addition, it is wise to ensure that your credit report is updated and accurate.

You need to prove that you are financially responsible by coping with your debts properly, so personal loans can be useful for people who have a poor credit history. Providing you settle your payments in full and on time each month, you can show lenders that you have turned a new leaf from your past financial misdemeanours.

High Rates of Interest

Numerous mainstream lenders turn away borrowers with bad credit scores, however some specialist companies are happy to provide personal loans to those with low scores, although the cost can be big. Building societies and banks might advertise attractive low interest rates. However, the rates only must be offered to fifty-one percent of people who are accepted for a loan. Virtually half the people who borrow pay another — typically higher — interest rate.

Looking at Alternative Options

There are many alternative options to apply for bad credit loans, if your credit score is low. These include:

A Credit Union

If there are any credit unions in your locale, they might be a sensible choice if you have poor credit. The reason for this is that credit unions are not permitted to charge more than three percent interest per month on loans.

This equates to roughly 42.6 percent APR. Nonetheless, you must join credit unions before you can borrow from them, and some might require you to set up a savings account with them initially. To access more information on credit unions and discover how you can borrow from them, visit moneyadviceservice.org.uk/en.

A Budgeting Loan

If you satisfy certain criteria, you can receive a loan from the government, free of interest, for as much as £812 to use for specific costs. To receive one, you must have been in receipt of one of the following benefits for a minimum of twenty-six weeks:

  • Income Support
  • Pension Credit
  • Support and Employment Allowance Based on Income
  • Jobseekers Allowance Based on Income

If you receive Universal Credit rather than these benefits, you might qualify for a Budgeting Advance as a substitute. The Citizens Advice website has more information about this. For further details about budgeting loan applications, refer to the Gov.UK website.

Additional Borrowing Options

Here are some more ways that you can borrow the cash you require, if your credit score is low:

Credit cards for bad credit applicants: You can enhance your credit history and avoid paying interest with these types of cards, if you meet your monthly payments. Nonetheless, the credit limits on these cards rarely exceed £1k, and the interest rates are steep if you require a longer repayment period.

P2P loans: Certain P2P lenders are happy to accept applications from people who have low credit scores. The interest rates with these lenders can be less expensive too.

A guarantor loan: Loans like these eliminate lending risks, by getting a third party to back your loan repayments. Due to this reduced risk, the interest rates might be lower. However, you must find someone who is prepared to be your guarantor.

Applications for bad Credit Loans

If you opt for bad credit loans, prior to applying you ought to find out whether you will be successful. Along with your credit history, there are a few other variables that will determine whether the lender accepts your application. These include:

  • How old you are
  • How much you earn
  • The other commitments you have financially
  • The current debt you have

All lenders set their own criteria for applications, so make sure that you satisfy each point before applying. To understand better whether your loan application will be successful, search for lenders who provide preapplication eligibility checks.

Often, these are known as soft search quotes. As well as telling you whether your application will be accepted, these checks reveal the cost of the loan without impacting your credit score.

Comparing Costs

Because people who have a bad credit history are charged higher rates for personal loans, it is particularly important to shop around to get a good deal. Although your choices are more limited when you have poor credit, comparing the prices of different lenders on price comparison websites will help you to find the cheapest possible loan.

Bad credit lenders must quote representative APRs for their loans. These are the rates that a minimum of fifty-one percent of people receives when applying, which gives you an indication of what the cost will be.

Furthermore, it is vital only to apply for a loan if you believe that you can cope with the debt. If there’s a good chance that you could encounter financial difficulties, you should seek assistance from a complimentary counselling service, like Step Change or Citizens Advice.

Guarantor Loans Result

A Guide To Guarantor Loans

If you want to borrow money from a bank or financial institution, it pays to have a plan for the cash before you even apply for the loan. This is because borrowing money is a serious matter. You must have clear ideas about how much money you need, the purpose of the loan and how you intend to repay the loan.

It also pays to know a few things about different types of loans and how they work. This article is about guarantor loans and the process of taking out this loan. However, before discussing guarantor loans, it is important to discuss why you might need this loan.

Why People borrow money

First off, borrowing money is not a hobby. People borrow money for different reasons and these reasons include the ones below:

Understanding Guarantor Loans

A guarantor loan is simply a loan where the borrower has a guarantor that covers the loan. This means that the guarantor enters an agreement with the lender to guarantee the said loan. In effect, if the borrower defaults, the guarantor can and will be held liable for the loan.  Once the guarantor signs an agreement with the bank or moneylender, this agreement will remain binding until the debt has been fully repaid. The guarantor can be a friend, relation or professional colleague of the borrower.

Qualities of the Guarantor

In most parts of the UK, a guarantor must be a legal resident of the country with a verifiable means of income and financial integrity. A guarantor should also have an excellent credit score. In some cases, financial institutions will only accept a guarantor who has landed property or other solid assets.

How the Process Works

A guarantor loan is all about trust and financial integrity. You want to borrow money from a bank, but you do not have sufficient collateral. The bank insists that you provide somebody they can trust to guarantee the loan. You provide the guarantor and the bank gives you the loan.

The point here is that the guarantor must trust you or else, he or she will not guarantee the loan. On your own part, you should make the monthly or quarterly payments until the loan has been fully repaid. This way, you earn the trust of the guarantor and everybody is a happy at the end of the day.

Guarantor Loans for People with Bad Credit

If you have bad credit, a guarantor loan is just right for you. Maybe you run a small business and you want to expand this business. You need capital, but you not qualify for a loan because your credit score is bad. You can easily get a loan if you find somebody to guarantee the loan.  Now, let us look at a typical scenario for guarantor loans. You maintain a current account with a commercial bank and so does your guarantor.

Now, your guarantor has £150,000 in his fixed deposit account and you want to borrow just £15,000 from the same bank. Your guarantor does not even need to pledge his shares certificates, Certificate of Occupancy or other documents to guarantee the loan. Once the guarantor pledges to guarantee the loan with the fixed deposit account, the bank will lend you the money you need.

Implications for the Guarantor

Banks and financial institutions are not in business to lose money and therefore they insist on guarantor loans for people with bad credit. Now, there are implications for the guarantor here. If the borrower defaults, the guarantor will be held liable because this is what being a guarantor means. Let us assume that you borrowed £15,000 from the bank and you are repaying the cash at the rate of just £100 a month.

If you miss one or two payments, this will not have any impact on the credit score of the guarantor. However, if you stop making the monthly payments entirely and the loan goes bad, your guarantor will be adversely affected by this unfortunate situation.

Options for the Guarantor

In case you are unable or unwilling to repay the loan, your guarantor has a number of options. The best move for your guarantor is to repay the loan and keep his or her financial integrity. This way, the guarantor’s credit rating is not affected by your inability to repay the loan.  Another option is for the guarantor to get you to meet your obligations to the bank.

In this case, the guarantor will find out why you cannot meet your obligations. By working together, the borrower and the guarantor will work out a pragmatic repayment plan to avoid financial embarrassment.

Mortgage Loans

If you want to buy a house, you can take out a mortgage loan to finance this project. Typically, mortgage loans involve a lot of money and the repayment period may be anywhere between 10-30 years. If you are a first time borrower, your banker or mortgage finance company will be more comfortable if a third party guarantees the loan. This reduces the lender’s risk and you can even negotiate better terms because the loan is covered by the guarantor.

Home Improvement Loans

You already have a house but the property is not in first class shape. You can take a home improvement loan to carry out renovation work on the property or remodel your house. You can even use the home improvement loan to construct a swimming pool or build extensions on the property. These things add value to the home, so your banker will lend you the money if you have a guarantor.

Business Loans

If you run a business, you might need one form of business loan or another to finance the business. Maybe you have a bright idea and you need capital to launch your start-up. The problem is that most banks do not finance start-ups because the risk of default is too high.

However, you can easily get guarantor loans if you can find a reputable person to guarantee the loan. If your business is on a sound footing already, you can take a loan to expand the business. You can also take a loan to invest in machinery or equipment to make your business more successful.

Investment Loans

It does not matter if you are a business owner or a salary earner. Anybody can take an investment loan if he or she spots a great opportunity. Maybe the stock market is on a rising trend and your stockbroker recommends that you invest in blue chip stocks.

Maybe you have a healthy portfolio already but you want to diversify your holdings. You might even need cash to invest in precious metals like gold or silver. If you do not have the capital for this venture, apply for guarantor loans and you will get the cash to fund these investments.

Now, we have discussed some of the scenarios that may warrant taking out guaranteed loans. The next step is to discuss guarantor loans in detail.

Final Word

Guarantor loans are excellent options for people with bad credit. This loan is also a good idea for first time borrowers and business owners that need capital. Take advantage of this option and you will enjoy the benefits.

Secured Loans Result

A Guide To Secured Loans & Homeowner Loans

A homeowner loan, often referred to as a secured loan, provides a means of borrowing bigger sums of capital (normally at least £15,000) by using your home’s collateral equity to guarantee repayment. Secured loans are designed for people who have poor or non-existent credit ratings, because banks only must take a minimal risk.

There are several providers of these loans, whose rates frequently change, and low interest rates are offered to draw in new customers. Typically, homeowner loans are paid back over a five to twenty-five year period, however longer loan terms might be available. Often, it is easier to obtain these loans compared to personal or car loans, because lenders know that they can always get their money back.

Loans for Home Improvement

Some people opt to use secured loans to pay for expenses related to home improvements and renovations. For instance, you may wish to increase the value of your house by constructing a conservatory or extension. Also, you could use the money for basic maintenance to make the property more pleasant and comfortable.

Borrowers tend to take this route if they want to leave their capital reserves in place for emergencies, or if they need to update their home but lack the necessary funds. Home improvement loan amounts vary greatly, based on the borrower’s credit file, the down payment size and the value of the home.

Things to Take Into Account With Secured Loans

Prior to applying for a secured loan, it is vital to gauge the affordability of the loan repayments. There can be many ramifications, if you do not keep up with your repayments. It all depends on how far you fall behind, and it could affect your credit rating and – more crucially – your home ownership.

Secured loans come in different forms, and your personal situation will govern the conditions of your agreement. The variables that lenders look at, when assessing your application for a loan, include your credit rating, your salary, the level of equity in your home, and your current credit commitments.

The rate of interest they offer will be based on your credit rating, and your home might be subject to repossession if you default on your repayments.

Categories of Secured Loans

It is important to choose the right loan for your circumstances to reduce the cost as much as possible. There are a few different secured loan categories available. These are as follows:

  • Fixed for Term Loans

With these agreements, you pay the same amount each month over the period of the loan. This offers you the benefit of stable repayments, and means that you can budget for your monthly expenses.

  • Fixed Rate Short Term Loans

With these deals, you pay a predetermined amount each month over the fixed rate short term period (typically between twelve months and five years). Then, your repayments change to the lender’s normal variable rate. This means that your payment amounts could increase or decrease.

  • Loans With Variable Rates

The interest on these types of loans can alter, based on market moves or changes to the base rate set by the Bank of England. As a result, your monthly payments – and the whole amount you pay back over the loan period – could rise or fall. If interest rates increase, you might have to repay considerably more than you expected, or – in a worst-case situation – end up defaulting on your repayments.

Failing to repay will damage your credit rating immediately, and letters from lenders informing you of overdue payments are frequently billed to you with interest, as a penalty. Happily, most legitimate lenders make less money from repossessing properties than having the debts repaid. If you might be unable to pay, or fall behind with your payments, tell the lender straightaway. Sometimes, they will agree to arrange a new schedule for repayments.

Additional Things to be Aware of With Secured & Homeowner Loans

  • Criteria for Qualification

Numerous loans have stringent qualification conditions, like residency and age (normally, you must be twenty-one to sixty-five years of age). Most of the time, you have to of lived in the UK for a few years, and have a stable income and current account.

  • Low Rates Advertised

Be cautious of headline grabbing rates. Legally, only fifty-one percent of successful loan applicants must be provided with these. Therefore, the remaining forty-nine percent could pay an alternative rate that is more costly, while others could be declined with a note entered on their credit history.

  • Capital Availability and Other Charges

Lenders might impose a charge for transfers performed on the same day. With standard transfers (normally a few working days), it is possible to avoid this charge. Read the conditions and terms carefully for other charges, like arrangement charges.

  • Penalties for Early Repayment

Certain lenders will penalize you if you pay back your loan early, to compensate for the interest they would have otherwise earned. The amount will vary, however it usually equates to a couple of months worth of interest, based on how soon you contact them.

  • Periods of Deferment

Some lenders provide ‘payment breaks’. Although these are useful during lean times, remember that you will carry on accruing interest, so the total repayment amount will rise.

Secured Loan Benefits

  • Easy Qualifications

Unsecured loans are typically cheaper for individuals with fair to excellent credit scores; however, as the name implies, secured loans offer lenders collateral, and therefore most loan companies are willing to offer such loans to consumers even if their credit is poor.

  • Large Borrowing Possible

£35,000 is the maximum unsecured loan, but secured loans can be acquired in amounts up to £2m or even higher depending on the lender.

  • Longer Terms

Secured lenders prefer lengthy loan terms, as arrangements of this type offset the initial setup cost of the loan, which can be quite expensive. Therefore, the duration of such loans is usually anywhere between five and 20 years. Unsecured lending, on the other hand, is generally one to seven years, and although longer loans are possible to lower the monthly repayments, they also significantly increase the total interest repaid, as outlined below:

Applying for a Secured Loan

A consumer with a current home mortgage can apply for a secured loan provided the person has enough equity in his or her property to cover the borrowed amount.

If the client co-owns his or her property with another person, or if the client has a spouse or is in a civil partnership, a joint application is required.

Advantages and Disadvantages

Secured loans for homeowner loans can be acquired in any amount between £5,000 upwards, making them a good choice for those who desire a substantial loan.

Even though total borrowing costs frequently work out higher than just the borrowed amount and the interest, the headline interest rate on most loans will fall somewhere between five and six percent.

An additional benefit is that it is easier for your client to repay the loan, as the monthly payments are fixed.

The amount a client personally borrows through a homeowner loan depends on the person’s income, existing credit commitments, overall credit score, and the amount of the property’s equity.

Therefore, although lenders may offer loans of up to £100,000, only a fraction of that may be available to consumers who have low credit scores, too many loans already, or not enough equity in their property.

Like personal loans, the interest rate provided by the lender varies from one borrower to the next, based on credit. Additional disadvantages include repossession of property if the borrower defaults on the repayments. For this reason, most consumers are motivated to pay in a timely manner.

Secured Loan Alternatives

A popular example of an alternative to a homeowner loan is an unsecured personal loan of up to £15,000, running for a length of five years. With this option, the consumer can avoid placing his or her dwelling in jeopardy, and the loan may also feature a lower interest rate.

Borrowing more than £15,000 may present difficulties, however, if the loan is not secured. Therefore, the best option for those looking to borrow a large amount of money is re-mortgaging to free up some cash. Mortgage rates for consumers with lots of equity can be as low as two percent.

Nevertheless, the downside includes the possibility of high initial fees and paying interest on the entire amount owed for a longer length of time.

FAQs

1. Can a client who does not live on the property apply for a secured loan?

Yes, provided the person can prove the existence of a formal tenancy agreement.

2. How do secured loans work?

In simple terms, the borrower has a loan that is secured against his or her property’s equity. He or she is required to make regular repayments until the initial amount borrowed, as well as the accrued interest, is paid off.

3. For Whom is a Secured Loan the Best Option?

Secured loans are not associated with upfront fees, and are usually more flexible for those on benefits only or pension incomes, or who reside in ex-council houses.

4. Self-employed clients without accounts

Affordability checks have become tougher than ever before, and many banks now require as many as three years of accounts for income proof. However, certain secured lenders on the Clever Lending panel accept an accountant’s reference, tax return or bank statement as proof of income.

5. The client has a complicated credit profile

Secured loans are quite flexible about eligibility, and therefore they are a good alternative for clients who have had problems in the past acquiring credit. Even those with missed payments or defaults on their credit history may find the solution is a secured loan from Clever Lending.

6. The client wants to retain his or her current mortgage arrangement

The client may prefer to retain a current low or fixed mortgage that was previously acquired. Opting for a secured loan is one avenue through which to keep the current rate stable, whilst simultaneously raising capital.

7. The client does not have enough equity for a re-mortgage

The client may discover there are limited LTV (Loan to Value) lending alternatives available. Therefore, if he or she has little or no equity, the preferred choice may be a secured loan. Clever Lending can assist individuals to identify possible alternatives if this is the case.

Final Thoughts

Like financial products like bank accounts and credit cards, secured loan deals vary greatly. Thoroughly researching the different loans on offer, instead of applying for the first advert you see, will improve your chances of paying a smaller amount of interest.

There are several free price comparison websites for secured loans, where you can input your property and credit information to see the most affordable lenders. This facilitates the process of locating the best deal for your situation considerably.

For a home improvement loan, you should ensure that the renovations will add utility and value to your property. If you need to borrow more than the likely market value of your house, this could be a poor financial decision.

Make use of comparable listings and other property resources to determine the value of your house before and after the updates. It can be useful to create separate home improvement lists, to differentiate the things that you must do from the things you want to do.

A Guide on Secured loans (Second Charge Mortgages)

A secured personal loan is also known as a second charge mortgage. It lets you borrow a lump sum of money which is secured against a property.

The property is secured by the lender through a ‘second charge’, which ranks after your main mortgage (which is held on a ‘first charge’ basis). This is a legal arrangement that is registered with the Land Registry.

You can use the money for whatever purpose you want (provided that it is not illegal or for commercial gain). However, second charge mortgages are usually used to fund large purchases (such as purchasing a new car), home improvements, or to consolidate existing debts.

Throughout the term of the loan, regular monthly repayments must be made. The term of the loan can usually be between five and 25 years.

The Financial Conduct Authority (FCA) have been regulating the selling and administration of first charge loans for quite some time. The FCA now also regulates second charge loans. Second charge loans are subject to exactly the same rules as regular mortgages.  This implies that you will need to be able to prove that you can afford to repay both the first mortgage and the second mortgages, with some room to spare.

Who is a secured second charge mortgage suitable for?

Secured loans are for those borrowers with an existing mortgage who want to borrow larger amounts of money than what standard personal loans can offer, usually a maximum of £250,000. Borrowers tend to have established equity in their homes that they can utilise as security against the loan.

What should I look for when taking out a second charge mortgage?

There are some catches and things that you need to understand before you commit yourself to this kind of secured loan, including:

  • The ‘second charge’ on your property signifies that if you default on a secured loan, the lender can eventually take you to court and order the repossession of your property. The first charge lender gets to be paid back first, and the second charge lender receives what is left, up to the outstanding debt’s value.
  • Interest rates of second charge mortgages are usually variable, which means that it is difficult to budget as the rate could increase or decrease. If you also have a  variable rate mortgage,  you might be affected twice if rates rise, so make sure that you can afford it.
  • Consolidating debt is usually seen as the last resort of homeowners. However, it can be a great way to get you out of a hole in the short term. Remember, if you opt for lower monthly repayments in return for a longer loan period, you will end up paying more in the long term.