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When considering taking a loan, there are numerous options available across the marketplace. Loans can be both secured and unsecured. If a loan is secured it means that the lender of the loan has a charge over your property and gains certain monetary rights against your home until the loan is repaid.
I would always advise a client to consider remortgaging to borrow the additional funds as they are more likely to get a lower interest rate and far lower fees. However, this is not always an option for various reasons.
When considering if a secured loan is right for you, the following should be taken into account:
Am I struggling to meet my monthly payments with my current debts?
Taking a secured loan would mean that you would end up with one, much more manageable monthly payment. However, you must be aware that you are taking debts that are unsecured and making them secured against your home.
Do I have enough equity in my property?
As loans will be secured against your property, you have to have at least 10% equity left AFTER the loan has been added or you will not be able to add any debt on. The lender will take your current mortgage into consideration and make sure that the mortgage + the loan is less than or equal to 90% of the properties’ value.
What is my credit rating like?
For those who have a poor credit score, remortgaging is not always an option. It is sometimes a good idea to consolidate all of your debts using a secured loan, and when your credit score improves in future, you can remortgage and add it into the mortgage itself.
Is my mortgage tied in?
If you are in a fixed rate mortgage, you are very likely to have an Early Repayment Charge that would be enforced if you moved lenders to borrow more money elsewhere. Adding on a secured loan would be more beneficial in this instance as it will not affect the current mortgage.
Am I able to borrow the funds from my current mortgage provider?
You can often ask your current lender to borrow additional funds, but I can bet my bottom dollar that you would not get the most competitive interest rate this way. Moving to a new lender is usually the way to get the best rate, but if this is not an option, a secured loan may be the answer.
If you would like to find out if this is the right option for you – you should speak to one of our advisers to find out more:
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