Our most frequently asked questions answered by our team of secured loan experts.
Answers to all your questions:
Secured loans offer you the opportunity to borrow fairly large sums of money over long periods using an asset that you own (usually your home) as collateral.
The name ‘secured’ refers to the fact that a lender will require this asset as security in case you cannot repay the loan. In this event they would sell the asset to recover the money you owe.
A secured loan is called a ‘charge’ against your asset and in the event that a lender repossesses it in order to recover their money, the lender of the 1st charge loan takes higher priority than the lenders for the 2nd and subsequent charges.
Typical uses for secured loans are:
- Debt consolidation
- Raising capital for home improvement (also known as home equity or homeowner loans)
- Second mortgages or second charge mortgages
First charge mortgages (note that these are generally not called ‘first charge secured loans’ but are simply called ‘first charge mortgages’. The term ‘secured loan’ is more widely used simply to refer to second or subsequent charges).
Secured loans are less of a risk for lenders than an unsecured personal loan, as the promise of repayment is secured against the value of your asset. In the event of default on the loan a lender may look to sell the asset to pay off any outstanding balance. As a result, this form of borrowing may be more of a risk to you as, potentially, if you miss repayments, the lender can repossess your asset. If you use your home as security this could potentially be repossessed to meet the balance you cannot repay.
It is therefore possible to borrow larger sums when you use an asset as security. The lenders we work with can lend anywhere between £10,000 and £2,500,000 secured against an asset, generally a property. This will be dependent on the value of your asset, the outstanding mortgage or finance on the asset and your particular circumstances. It is always better for you if you seek independent financial advice before you enter into a secured loan to see if other more suitable options may exist.
This would be subject to your individual circumstances. The lender panel which we use typically offer rates between 4.75% and 18.9%.
It may be possible to get a secured loan even if you have poor credit. This is subject to individual lender criteria and your personal circumstances. Our advisers can provide you with more information if this is the case.
When you borrow from a lender that takes your asset as security on the repayment of a loan, the risk of lender loss in the event of non-payment is reduced as the sale of this asset will be used to clear the balance should you not be able to repay. As this is the case, second charge lenders can be more lenient in taking poor credit ratings into account when assessing an application for a loan.
You should be aware that the risk of losing your home, if you use this as security, is greater if you miss repayments than would be the case with an unsecured loan. It is always advisable to seek independent financial advice in order to ascertain whether a secured loan is right for you compared to other types of loans.
Valuation fees are not charged upfront on secured loans. We will cover the cost of this on your application. There may, however, be a broker fee charged.
All fees and charges that you have to pay to take out this loan will be detailed to you before issue of funds. If you have any questions at any stage of the application we are more than happy to help you understand what fees are charged.
It is still possible to get a secured loan when you are self-employed. This will be dependent on your personal circumstances and each lenders’ criteria.
If you are self-employed further documents regarding your income and company performance will be needed. These may include audited accounts and proof of income received over the past three years. Our team can advise you as to the exact requirements when you call us.
No. The only note on your credit file that will exist when you make an initial enquiry will be a Quotation Search which will only be visible to you and not by other searchers.
When you make a full application then a full search will be undertaken which will show up on your file at that stage. This will be visible to other lenders.
The amount of paperwork that is required is dependent on the loan amount sought, the Loan to Value amount against your asset, your credit history, the purpose of the loan and your individual circumstances.
In general, we would require you to complete an application form as well as provide us with your permission to search your credit file. We would also require your passport or driver’s license and a recent utility bill for identification purposes. Depending on loan amount sought, a valuation would be needed.
Throughout the application our advisers will keep you informed on the status of your application. Where other documents are required we will let you know so that the process is as smooth and convenient as possible.
While this process is a lot shorter than a mortgage or remortgage application, the exact length of time from application to you receiving the funds depends on the amount of the loan required, the loan amount to the asset value, the lender chosen and your individual circumstances.
Once the loan is approved by the lender, they will transfer the money to you typically within 48 hours if telegraphic transfer is the payment method.
If you miss repayments on a secured loan then potentially, the asset you used as security can be taken to repay any outstanding balance. While this may not happen if you miss a single payment, it may be more likely if you missed a number of consecutive payments.
It is also recorded on your credit file that payments have been missed and a charge may be applied by the lender for each payment missed. You should be aware that the risk of losing your home, if you use this as security, is greater if you miss repayments than would be the case with an unsecured loan. It is always advisable to seek independent financial advice in order to ascertain whether a secured loan is right for you compared to other types of loans
Yes, but you must be at least over 18.
However, not all lenders on our panel will provide a secured loan to someone under 21. Our advisers can provide you with further information should you require it. Even where a lender will lend to a person under 21, your financial circumstances will be taken into account before any loan application will be successful.
In general lenders will require you to have at least 6 months repayment history on a mortgage before they will consider an application.
There are some lenders who will consider an applicant who has been in their property for less than 6 months but this will be dependent on other criteria. Our advisers can explain these to you and assist in providing the most suitable product to meet your needs.
After we have identified a suitable lender for your circumstances, and to whom you wish to proceed with, you will receive from us an application form as well as an Advance Copy of the Lender’s proposed Credit Agreement. This advance copy is a non-signable version which you should NOT sign or return to us because, by law, you have 16 days within which to consider whether you wish to proceed with the loan or not. This cooling off period is called the Consideration Period. By law neither we nor the lender may initiate contact with you in the 7 days after we have sent you this advance non-signable copy.
After the 7th day you will receive a signable copy of the proposed Credit Agreement which you should sign and return only once you have decided to proceed. Before you sign this signable version you may pull out of getting the loan at no cost to you. However after signing this you will be legally bound by the loan conditions and would face the lender’s exit costs to withdraw.
A secured loan may not always be better than a remortgage. This may be the case when your credit rating is high or the rates and charges are less in regards to a remortgage. You should seek independent financial advice to be sure that a secured loan is the best course of action for you.
There are some instances where the use of a secured loan product may be more suitable for you than a remortgage:
Where your current rate is lower than most other rates on the market
In some cases, especially on older mortgages, you may have an extremely low rate of interest that may be based on a small margin above the Bank of England’s standard rate (i.e. a tracker mortgage). Should you want to remortgage or borrow additional money with this mortgage lender, part of the condition of extending further credit may be for you to transfer on to a higher or standard variable rate for the entire mortgage. This means you could end up paying more than if you had kept your initial mortgage in place and raised additional funds as a second charge secured loan against your property.
When you need access to funds
Secured loans can be quicker to set up, in contrast to a mortgage or remortgage. Although, this is dependent on the sum of money required, the loan to value against your asset as well as your credit history, purpose of the loan and your individual circumstances.
When you have issues in proving your income
This is especially true if you are self-employed or recently moved to self-employment. Whereas with a first charge lender, one year’s accounts are a minimum requirement, secured lenders can be more flexible in the level of detail they need to underwrite the loan. This again is dependent on the loan amount sought, the value of the loan against your asset value and your individual circumstances.
When you have a poor credit score
Secured lenders are a lot more flexible in their approach to applicants with a poor credit rating. Your exact circumstances will be taken into account when coming to a lending decision on your application.
It must be for a legal purpose and must be evidenced by documentary evidence in most cases.
Some lenders may have further restrictions in place as to what the funds can be used for especially where the reason for raising the funds is to consolidate more expensive, personal loans.
When the most suitable loan has been found, you will need to have the following documents ready:
- 3 months pay slips
- Passport or drivers licence (must for your current address)
- Mortgage statement
- Utility bill/bank or credit card statement/fixed line telephone bill, dated within the last six months
Some lenders may require further documents when they assess your application. Your Enterprise adviser will let you know what is required once we are informed by the chosen lender.
When you contact us or request a call back from one of our advisers, we will go through a number of details to source the most appropriate product for you.
The initial details required will be:
- Your personal details
- the amount of funding you require,
- the asset on which you wish to secure the loan,
- the value of the asset
- the amount outstanding should there be a first charge on the asset
- your current income
- your current expenditure
- the purpose of the loan
- details of your repayment history on other finance or loans
Once we have obtained this information we can search the most suitable loan for you from our panel of lenders and advise on that which is the most appropriate, whether that be based on amounts or rates.
After an initial application is made, the lender will let us know what further documentation or other details are required to progress your application. We will liaise with you to ensure that this process is as convenient and trouble free as possible.
Enterprise Ltd. advisers are available to you at all stages of the loan process to help and assist you with any questions you may have.
Not always, but you will need to be able to provide us with proof of your current address.
We would require a utility bill, credit card or bank statement or fixed-line telephone bill dated within six months prior to the date of application.
The nature of a secured loan is that your promise to repay is secured against an asset you own, e.g. your house. There is a potential risk that should you miss repayments or be unable to repay the loan, your property could be repossessed to cover the outstanding amount owed. This is unlike non-secured personal borrowing, such as credit cards or personal loans.
A secured loan can be taken out over a maximum term of 30 years (dependent on your individual circumstances). This means that you would pay more for a secured loan than if you take unsecured personal lending. You should be certain that you are aware of the length of time that you are taking out the loan for and that this will remain affordable. Our advisers can talk you through your affordability and suitability of the product recommended.