How to Raise the Odds of Approval on a Second Charge Loan!

Melinda (Milli) Haine Melinda (Milli) Haine | Loan Underwriter

Most of us have experienced those times when we could have used some extra cash for one reason or another. If you are a homeowner, you have access to cash by using the equity in your home to obtain a second charge loan. The amount and length of your borrowing can be flexed according to what you need the money for and how much equity you have. What's more, most loans of this type can be arranged quickly and without a lot of hassle.

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Perhaps the biggest advantage of second charge secured financing is that you can use the money for a long list of things. Unlike a dedicated loan for car or house, a secured loan can be used for debt consolidation, home improvement, or to pay the unexpected expenses that accompany a wedding or university education.

Some consumers even use a second charge bridging loan to cover the financial gap that might exist between purchasing a new home and selling the old one. Bridging loans, which were once only the domain of commercial property owners, are now popular among residential homeowners as well.

In order to ensure you get the second charge loan you are after, you do the following:

  • Know Your Equity – Secured loans are based on some sort of collateral. In most cases, that collateral is the equity in your home. So know what it is before you apply. You will not be able to borrow more than this amount.
  • Understand LTV – You need to understand the loan-to-value (LTV) ratio before you apply. The LTV ratio is the percentage of the equity in your home that you are eligible to receive. The combination of equity and LTV ratio define your borrowing power.
  • Maintain Your Property – Equity is the difference between what your property is worth and how much you still owe on it. In order to maximise equity you need to take care of your property. Do not neglect routine maintenance and, when something does break, get it fixed right away.
  • Maintain Your Credit – Some lenders advertise secured loans without any credit check or verification of income. However, these loans are the exception, not the rule. You can help your case by maintaining good credit in the months leading up to applying for second charge financing. Better credit increases the chances of being approved.

It is important that you only apply for one secured loan at a time. Why? Because every time you apply for a loan, the lender runs a credit search on you. Those credit searches count against your credit score to some extent. Multiple searches in a short amount of time make it appear as though you are desperate, reducing your overall credit score.

Compare Lenders

Ensuring you get the second charge financing you're looking for is a combination of the things mentioned above and the process of comparing multiple lenders side by side. You can use the Secured Loan Expert whole of market lender comparison tables which provide the best rates on offer along with all the loan details you will need.  A comparison does a couple of things. First of all, it shows you which lenders are most likely to offer you the best rates and terms. Second, a comparison gives you a benchmark enabling you to create a short list of the most favourable lenders for your circumstances.

You can use that short list as a starting point when you speak with one of our friendly experts prior to making any application. When you contact them, do not be afraid to ask as many questions as you need. It is important that you know the details before you actually apply. On the outside chance you are rejected, take a look at your credit report. There may be something out of order that can be easily rectified.

If you own a home with equity, you might be able to take advantage of a second charge loan for any number of purposes. You might want to consider such financing if you're looking to make home improvements, consolidate higher interest debt, or meet unexpected expenses with fast, affordable financing.

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