San Francisco | Secured Loan Questions | Mortgage residential and commercial home loans SF

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San Francisco | Secured Loan Questions | Mortgage residential and commercial home loans SF

What is Secured Loan?

What exactly is a “secured loan”? A secured loan is a loan secured on your property. The secured loan provides some form of security or collateral, regardless of whether it is mortgaged or owned outright. You can often borrow larger amounts with loans secured on property potentially up to £500,000. Cheap secured loans have interest rates that are normally lower than with an unsecured loan because of the lower risk to the lender. This is the reward the lender will give you for the security that you give them. An unsecured loan simply means that there is no “security” for the lender as in the case with a secured loan, and this therefore means a higher risk for the lender. An unsecured loan therefore relies only on your previous credit history to asses if you are likely to repay the loan.

Secured loan lenders will look at this but also look at the amount of security or equity in your home. This means that they are usually a lot more flexible in their underwriting criteria. Therefore you are more likely to be accepted for a secured loan if you have had previous credit problems or are not the conventional applicant e g you may be self employed, have unprovable income or be older than the type of applicant that unsecured or personal loan companies will try to attract.

In the absence of security or equity the lender raises the interest rates in order for the loan to be more viable for them. An advantage of secured loans is that you stand a good chance of being approved. Even if you have some adverse credit history like county court judgments, defaults or arrears. So a secured loan is a good choice for those who would otherwise not qualify for a loan from their local bank.

Can I get a secured loan if I have bad credit?

Yes. Many of the secured loan lenders specialize in lending to those people who may have had ccj’s (county court judgments), defaults, mortgage arrears, missed payments, low credit score even ex-bankrupts. Because you are offering the security of the equity in your property the lenders can afford to be much more flexible in whom they lend to.

What is APR?

This stands for Annual Percentage Rate. Any firm that lends money is required by law to quote the APR. Introductory rates do not include arrangement fees you may be charged and also don’t reflect any higher rate of interest that your borrowings will ultimately revert to. The APR takes into account the interest on a loan plus and additional charges making it easier for you to compare products. In general, the lower the APR the better the deal.

What is LIBOUR rate?

LIBOR stands for the London Interbank Offered Rate and is the rate of interest at which banks borrow funds from other banks, in marketable size, in the London interbank market

Do secured loans have early repayment charges?

If you repay (redeem) your mortgage at any time prior to the end of the mortgage or loan term you may have to pay certain fees or an interest penalty (redemption penalty). If the mortgage is repayed in the early years there may be a heftier penalty, a product penalty. An extended redemption tie-in means that this penalty will continue to be payable beyond the initial term of the mortgage. However, recent government rules mean that a lot of secured loans are protected against high fees by the consumer credit act. Check if your secured loan is and if not that you fully understand any terms and conditions surrounding early repayment of your loan.

Will secure loan lenders lend to the self employed?

Yes they are. Self employed income can be proved through accounts or on a self certified basis. What does self certified mean? Well; normally when applying for a mortgage or secured loan you will be asked to provide pay slips or company accounts to prove your income. If it is difficult or inconvenient to provide this documentation, you can choose to self-certify your income. This involves signing a declaration which states your income sources and amounts. Lenders will usually charge you higher rates than average and offer you a more limited range of mortgages if you choose to self-certify your income.

Are Secured loans used for debt consolidation?

All the time. This is one of the purposes that secured loans are ideal for. Secure loans can be used however for almost any purpose; home improvements, refinancing debts, car purchase, holiday, second homes, holidays, practically anything!

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