When is a Secured Loan the right answer?

by Bernard McKay
Loans Manager moneyQuest

1 September 2008

Put simply, when a remortgage is either not available or, when a remortgage is too expensive at the current time.

A secured loan is simply another borrowing option when someone is looking to either raise some finance or is looking to consolidate existing borrowings.

There are now a staggering amount of borrowing options available to consumers in today’s lending market. There is always a balance to be struck between the costs of the loan in terms of interest rates plus associated fees and affordable monthly repayments.

Wherever possible the money should be borrowed over the shortest possible term at the lowest rate available and if both of these can be achieved via a particular product then the chances are that will be the best solution.

However, although many unsecured lenders offer extremely competitive rates, these are often only available up to a maximum of £25,000 and are only offered over a maximum term of between 7 and 10 years. If the loan required is above this amount or the repayments over this maximum term are too high then the only way to obtain the funds are via a mortgage or a secured loan.

The UK mortgage market is now very competitive and most lenders will be open to discussing a further advance or a remortgage. If the unsecured route is not available then this should be the next option. Mortgage lenders will make further advances available either at their standard variable rate or possibly below this. They will also consider the option of having a different term to the further advance than exists on the main mortgage.

If a further advance is not available then remortgage would be the next port of call.
However, a remortgage may not be right if you have a good current product and do not want to lose the benefit that offers by switching to a higher rate product.
Equally, you may be tied in to your existing mortgage product and redeeming this would incur a high penalty. Finally your circumstances may have changed since you agreed your mortgage and therefore any new mortgage would be on different rates.

This is now where a secured loan could become the right option.

Loans are available up to £150,000 on terms of between 5 and 25 years. Whilst rates are not as good as first charge mortgages, the secured loans market is now very competitive and you may be surprised at what is now available from secured loan lenders.

At moneyQuest, we will run though the various options available to you with our free mortgage and loan quotation service. Whilst headline rates are always the main eye catching point, there are many other considerations that have to be factored in such as redemption penalties, fixed rates, lender and broker fees, together with the service available from the various lenders.
At moneyQuest we will look to gain a comprehensive understanding of your needs. Once we establish these, then it could be that a secured loan is the right solution for your currently and if it is then you can be confident that we will find the most competitive product available to you.

Think carefully before securing other debts against your home.  Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Our secured loan advice is free up to the point of completion, whereupon a fee of between £595 and £995 is payable dependant on your individual circumstances.  Our typical fee for arranging a secured loan is £795.  This fee is added to the loan.  We will also be paid a commission from the lender.

Article Approval Ref: H0093489