Could a secured loan help you in 2023?
There’s nothing more frustrating than a “computer says no” approach to mortgage lending.
The banks’ systems may view life as ‘Black and White,’ but we know people live in shades of grey.
These days, more people than ever before are not meeting the “traditional” criteria many banks look for with standard mortgage applications. For example, you might have taken out several loans to help with your day-to-day living costs. Perhaps you needed a high-interest car loan to get you on the road. Or maybe you needed a quick loan to give you the funds to replace the boiler when it packed up in the middle of winter.
If you have a poor credit history or are saddled with various debts, then all is not lost.
There are options available to help you improve your finances, such as a secured loan.
Secured loans for debt consolidation
A secured loan, also known as a homeowner’s loan, is a financial agreement allowing you to consolidate all your existing loans into one manageable debt. Rather than repaying different interest rates with varying term lengths, a secured loan debt management plan will leave you with one monthly repayment. This allows you to simplify your debts and see how much income you have left each month.
The loan is considered secure because it is put up against the value of your home. Lenders are more willing to offer secure loans because if you default on your loan, they will receive their money back by selling your house*.
Secured loans for home improvements
Is your home meeting your current needs? Do you dream of adding a purpose-built utility room or converting your garage into a usable living space? Even minor alterations, such as replacing your boiler or windows, can cost thousands of pounds that require upfront sums of cash.
Often, hard-up Brits will use equity release as a way of funding home renovations.
It makes sense.
After all, if you’re likely adding value to your property, it’s a win-win for you and your mortgage lender.
But if you have a poor credit history, mortgage lenders may be reluctant to extend your capital.
Moreover, using a remortgage application to release money tied up in your house can leave you tied into a lengthy (and potentially expensive) deal. For example, you might only need a few thousand pounds to upgrade your pad, but if you’ve got 25 years left on your mortgage deal, that’s a long time to repay that additional capital.
A secured loan for home improvements could be a viable alternative.
While personal loans typically need to be paid back in five years, a secured loan is a long-term debt that could be taken out against your home for 10-15 years.
What’s more, secured loans have lower fees, and it is easier to get a secure loan with bad credit history. You can find that the cash is released in just a few days.
Secured loans are ideal if you want to remain on your existing mortgage deal
We predict that secured loans may become increasingly popular over the next year or two. The mortgage market is rapidly changing. Deals that were commonplace a year or so ago are like gold dust these days. If you’re lucky enough to be tied into a four- or five-year fixed deal on a sub-2% interest rate, we highly recommend that you stick with it.
Remortgaging to release equity in your property will mean moving away from your current deal. You could find taking out a secured loan in addition to your monthly remortgage payments makes more financial sense. You might be repaying two separate loans (your mortgage and your secured loan), but the interest repayments could be far lower than any remortgaging deal currently available.
Always take independent advice before making any decision
Do you have several debts, or are you looking to release equity from your home? If so, you should always seek independent advice from a qualified mortgage adviser registered with the Financial Conduct Authority (FCA). Like us!
At The Mortgage Expert, our team of experienced mortgage advisers works closely with specialist mortgage lenders across the UK. We can get to know you and your credit history and explain the secured loan process to you.
Please get in touch if you want to know more about how we can help you.
*YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE