A secured loan can be used in many situations to assist a client get their finances back on the rails. When a client has a poor credit rating or even CCJ(s) they often do not want to go down the route of a debt management plan (DMP). Also the client may have a very good mortgage deal currently running with penalties to change.
A re-mortgage isn’t always the answer as there are other alternatives that can assist most situations. What we are seeing is secured loans being used to settle unsecured debt that has built up over the years gone by. This could be a simple loan or a number of high interest credit cards which eat into the monthly family budget. A secured loan can be raised on the existing property which will have one lesser payment each month helping the client get back control of their finances.
Second charged lending is growing in stature every year and figures show clients are very receptive to this form of lending. The client feels they are far more in control with a second charge rather than an unsecured loan plus the secured route is far more cost effective.
Second charge loan advantages:
There are many very good reasons to consider a second charge loan over a re-mortgage and these are just a few.
1) Speed of completion
2) Flexible repayments
3) Lower interest rates
4) No early repayment fees
5) Lower set up charges
Why choose secured lending?
One reason you may wish to choose a second charge loan is that it’s likely to offer better rates of interest as the loan is secured. Unsecured loans from high street banks and other sources can be notoriously expensive we have all seen the rates charged by the “pay day” lenders.
The reason for a secured loan being more cost effective is due to the lender having to assess the risk. If you are a high risk borrower they will need to offset the risk with higher interest rates. So if you offer security on the other hand, then the risk involved is much lower and the lender will offer far better rates.
This is indeed particularly useful for those who might find it difficult to obtain the loan required without security. Such groups of people may include the self-employed or those who have had past credit problems.
For many people the choice is between a second charge loan and re-mortgaging rather than between second charge and unsecured loans. There are a number of reasons a second charge loan may be preferable over a re-mortgage but there are two key very common factors;.
• Your credit history has deteriorated since you took out your mortgage.
• You currently have a mortgage with penalties to change.
These two factors alone make a second charge deal an attractive way forward to securing the funds required.
Second charge application levels rising
Buy-to-let second charge
This area of fund raising is growing ever more popular by the day as people see this as a credible and affordable way of raising funds. Clients who would benefit include interest only borrowers, people facing early repayment charges plus anyone who is benefiting from a lifetime tracker deal. Also any client who may have a fixed rate mortgage in mid-term could also see this as a very good option to raise capital.
Landlords could also be in line to benefit from increased competition in the buy-to-let second charge market, leading to significant pricing reductions. This could make second charge lending a very attractive alternative to re-mortgaging, thus allowing landlords to benefit from released equity within their portfolios.
Many landlords are unaware of this type of funding but we are seeing an increase in awareness as enquiries increase weekly.
2nd Charge loan uses for landlords:
• Releasing equity
• Credit history problems
• Early repayment mortgage fees
• Speed of completion is vital
• Short term deal is required
Second charge lending can be better
A great many brokers are still holding onto false preconceptions the second charge loans are always more expensive than a re-mortgage.
When looking to raise secured funds many things need to be taken into consideration as a re-mortgage is not always the cheapest route to take. If the credit history is not so good for example this could have a massive bearing on the rate charged by a mortgage company plus the set up fees could be much higher.
Second charge loans should always be considered if:
• Poor credit history since taking out the mortgage
• Client has recently gone self-employed
• Client has changed jobs
• Short lived string of employment contracts
• Current mortgage has penalties for encashment
As we can see there are a good many reasons why a second charge loan needs to be considered when raising new capital. This type of loan in the past was thought to be expensive but that has all changed in the last few years and now deserves fair consideration.
A second charge loan on your home can be the fast and effective way forward to achieving your goal so be sure to check out what is on offer.
Second charges are faster
Second charge lending continues to grow in stature month on month as homeowners look for loans at affordable rates. A great deal more people see this type of funding as a quick and easy solution to their financial problems.
One of the big appeals that second charge lending offers is speed of advancement which can be very important to the borrower. On average a second charge loan is completed within 25 working days, this does of course vary dependant on the complexity.
A recent survey showed that 48% of people surveyed said speed of completion was their priority with affordable rates polling 39%.
This year has seen a significant reduction in completion time for second charge secured lending. Lenders have seen their market share grow at a rapid rate and they have recognised the importance of speed in completing a deal as competition hots up.
There is no doubt second charge lending has had its most successful year, the good thing about this is the lenders have taken this on board and expanded to meet the challenges.
As this sector of the market continues to build on its successes we are seeing lenders produce new and more flexible products to assist to borrower. These are indeed very exciting times ahead for the second charge finance market as the industry looks forward to 2016.
Loan choices increase
It is without doubt secured lending popularity is increasing on a daily basis. Second charge mortgages have increased this year month on month and continue to do so.
This type of lending is so easy and quick to secure lenders are increasing their portfolios at a rapid rate. An average case presented will complete in approximately 28 days, as you can see this is so much quicker than the standard re-mortgage.
We are seeing different lending plans emerge daily and this can only be good news for the borrower. Interest rates and fees are reducing as well as lenders see this market as a growth area in the longer term.
The biggest growth area of loans is to the self-employed and the good news is there are many different plans to suit each individual case. Loans can be fixed for various terms which can give peace of mind or you may wish to just take the standard variable rate.
This is a rapidly expanding area of lending and products are increasing to match the demand. It is vitally important you research the market to get the best plan to meet your needs not only now but in the future.
Market share increase
The great British public’s attitude to finance can be a very funny thing in general we all are very reluctant to talk about our pay packets and what they contain. On the over side of the coin we are only too pleased to tell everybody just how much our property has increased in value over the last 2 years.
Another favourite subject of discussion is what plans we have to improve our property and just how much it is going to cost. Again on the other side we perhaps don’t want to talk about how we are going to fund this ambitious project we have in mind. This could well be why the huge growth of second charge loans and mortgages goes unnoticed.
A recent review of lending shows second charge loans and mortgages have increased by 37% on last year. The current market in this area is without doubt on the increase as more people become aware of just what alternatives are available to them.
In the past people needing to raise capital simply re-mortgaged and this is most certainly not always the best advice.
One very interesting fact the report highlighted was that secured lending has increase since the economy improved. It suggests that people are far more confident in such times and want to proceed with upgrading property as they feel a lot more secure.
The range of second charge loans is increasing daily and we are pleased to say interest rates are becoming more and more affordable and flexable. If you are considering this option for your next loan it is recommended to seek professional advice as to which is the best way forward for you.
Could this benefit you?
Up to one in ten homeowners seeking further cash advances in the UK may well benefit from taking out a second charge loan rather than re-mortgaging. With a combination of record low interest rates within the second charge loan sector and rapid lender growth the benefits are there for customer to explore.
Homeowners who could potentially benefit from a 2nd charge loan are interest only borrowers, clients facing early re-payment charges to re-mortgage and those on a very advantageous fixed rate deals.
Another sector of potential clients is landlords who could also benefit from a second charge loan. If the landlord has a buy-to-let property with a fixed rate mortgage with some years to run then this could be a very good way of raising important capital.
The second charge mortgage market has grown in strength year on year since 2010 with record lending figures already being achieved this year. This option is most certainly a viable proposition if you are looking to raise capital quickly and efficiently against your property.
Would this help you?
Many home owners these days are looking for ways to raise capital which is safe and cost effective. Over recent years property values have increased greatly and many home owners will be pleasantly surprised to see just what their property is now worth. In the majority of cases it is more cost effective to raise a loan using the house as security even if you have a mortgage secured against it already.
As an example if your property is currently valued at £200,000 and your current mortgage is £120,000 you have £80,000 equity. There are many good quality lenders who would be interested in a second charge loan/mortgage on the equity within your home. The plus side of all this is the costs are affordable and can be set to your budget. When you look at these payday lenders and the interest they charge you will see the value this type of plan offers.
The pros of a second charge mortgage
Your credit history may well not be so good now and you want to borrow to let’s say extend your current property, this could be the cheapest solution.
You may be self-employed and having problems raising finance, this route could be the perfect solution by utilising your property.
Repayment terms and periods are very much to your requirements so they can be tailored to suit your budget.
Some lenders will allow overpayments and early total repayments which can save a large amount of money on interest charged.
Need some assistance?
If you think this type of loan could assist you in your future planning it is very important to ensure you get the right one to suit you. There are many different lenders offering numerous second charge loans so please do call our advisers who will be happy to help you achieve the correct loan for you.