There have been some changes in the secured loan sector over the last few months. This does not involve how the secured loan process works and the regulation process has not changed. The main changes have been with the fact that the lenders have tightened things up and it's a bit harder to get a secured loan.
With the sub prime fallout in America we have seen the effect ripple through to the lending process in the UK. The amount of mortgages that have been turned down is at an all time high and if you want a secured loan it has become harder to come by.
A secured loan is sometimes called a second charge loan because the mortgage is the first charge and any other loan taken out thereafter is secured on the property is called a second charge secured loan. This is why a secured loan will usually have a higher APR than the mortgage.
The biggest change comes in the loan to value. In the last few years we seen secured loan companies advertising that they can offer loans up 125% of the property. This has changed and most companies will now only offer about 90% loan to value.
The loan to value is calculated by adding you mortgage and the amount you want to lend and then taking it as a percentage of you house valuation. The reason it has been easy to get a secured loan in recent time is because house prices had gone up very quickly and home owners took advantage of it.
However over the last few months house prices have slowed down a lot and this has lead to fewer home owners being able to take out secured loans. The amount of applications has actually gone up but it's just harder to complete the loans.
Taking out a secured loan is a longer process than taking out an unsecured loan. With an unsecured loan you can have your money within a few days. However a secured loan can take longer as you usually have to wait for credit checks and then a valuation of the property.
The quickest you could obtain a secured loan would be about three weeks. Loans over 25,000 GBP are unregulated and so have no cooling off period so it's possible to get these a bit quicker.
If you want to raise a large amount of money for a one off event like perhaps home extension, loft conversion or a big wedding a secured loan is a very popular way to do it. The fact than you can spread the payments over a longer period seems to be an attractive option to many home owners.
With the recent interest rate hikes over the last year many home owners with fixed rate Mortgages do not want to move home as they will have to switch their mortgages and they know they will not get as good a fixed rate now with the higher interest rates. So instead of moving they apply for a secured loan and put an extension on their existing property.
Lenders have also tightened up on details of people's income. In the past they paid more attention to the value of property and less on their income but they now calculate if the borrower will be able to make the payments. This also leaves it more difficult to get a secured loan. However if you are consolidation debt this is taken into account and the reduction in your monthly bills can become an advantage.
So in conclusion there are still good choices available when taking out a secured loan and the loans will be suited to your circumstances. However the lenders have tightened thing a lot and it means that there are more applications being turned down. However the amounts of applications are at an all time high so they are still very popular in the UK.
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