SECURED LOAN

This is a loan which is backed by assets belonging to the borrower in order to decrease the risk taken on by the lender. The asset in question with the majority of secured loans is a property on which a mortgage already exists. The assets may be forfeited to the lender if the borrower fails to make the necessary payments especially on a secured loan or second charge.

Secured lending should be considered when an individual is unable to consolidate using unsecured lending. These conditions arise especially when:

• The total debt is over £25,000
• When the borrowing is considered too high a risk for unsecured lending
• Or when the monthly repayments on unsecured debts are too expensive

Some of the benefits of a Secured loan are:

• It invariably gives a Lower affordable monthly payment.
• A Single payment is often easier to manage than multiple payments.
• Credit rating is not impaired, if there was a risk of defaulting on the various unsecured lending.

Some of the hazards of a secured loan are:

• Your Home is at risk if repayments are not maintained
• Interest costs over the period of the secured loan are significantly higher as the term is often extended.
• There is the Risk that spending may still continue on other forms of credit, eg. credit cards etc.

The main difference between an unsecured and a secured loan is that under a secured loan, your property is offered as a guarantee of the debt. If the secured debt is not repaid by an agreed, regular, monthly payment, then the lender can force the sale of the property in order to recoup the debt. This obviously has severe consequences for any client and their family. Repossession could impair their credit rating for years to come.

Make sure the monthly payments are affordable. It is often wise to complete a monthly budget planner to see what funds are available each month, after essential cost of living expenses, such as rates, utility bills and food bills, etc. have been taken into account.

Interest rates on secured lending can be substantially higher than a normal mortgage or unsecured loan, especially if a client’s credit rating has been affected previously by late or non payment of other debts. Be careful not to continue to build up other types of debt, such as credit cards and overdrafts. This only fuels the problem and could result in default on the Secured loan which in turn could lead to repossession.

WHAT SHOULD YOU DO?

Give us a call or complete one of our simple contact forms & you can choose whether you would prefer a fully qualified advisor to contact you to assess your situation or whether you would prefer to submit more information through our website & have a recommendation supplied to you within 24 hours.

Whichever method you choose, you are under no obligation to proceed with any recommendation. We have access to the whole of the market & our advice is totally impartial. We feel confident that our advice will have significant impact on your financial circumstances.