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Frequently asked secured loan questions

What is a secured loan?

A secured loan is a loan that is secured on property, which the lender is able to repossess to get their money back in the event of non payment.

Secured loans tend to have better interest rates than unsecured loans, as it is seen as less risky lending.

How does a secured loan work?

A secured loan works in the same way as a mortgage, as you are borrowing money against the value of your home and a second charge is registered (the first charge registered is your mortgage).

Once you have repaid the loan, the charge is removed.

What is a second charge loan?

A second charge loan is a secured loan on a property that has a 1st charge mortgage.

What is a second charge mortgage?

A second charge mortgage is the same thing as a second charge loan, a secured loan and a homeowner loan. There are lots of terms for the same thing.

It is a loan which is secured on property, the first charge being the mortgage. If you do not pay any loans that are secured on property, the lender can eventually repossess the property and sell it to get their money back. The order of the charges on the repossessed property determines the order in which the lenders receive their money back, for example the second charge lender would only receive their money if there was enough to repay all the debt owing to the first charge lender.

What is the difference between a secured and unsecured loan?

An unsecured loan is also known as a personal loan, it is not secured on anything. If you default on the agreement and do not pay, the lender cannot take your property from you.

A secured loan is secured on an asset, so the lender has a legal right to repossess your property (once they have taken you to court) if you do not make repayments.

Secured loans tend to have more competitive interest rates than unsecured loans as they are seen as less risky to the lender.

What is a secured personal loan?

A secured loan and a personal loan are two different things so there is no such thing as a secured personal loan. There are several terms for the same type of loan which can cause confusion.

A secured loan (also known as a homeowner loan, a second charge loan or a second mortgage) is a loan which is secured on property.

A personal loan (also known as an unsecured loan) is not secured on an asset, so if you do not make repayments, the lender cannot repossess anything.

How long does it take to get a secured loan?

It really does depend on quite a few factors, but on average it takes 2-3 weeks from the day of applying through to completion. In some cases, it is possible to do it all in just a couple of days.

Where can I get a secured loan with bad credit?

KIS Finance have access to the whole of the market, meaning we can arrange secured loans with any lender. Some lenders will accept applications from borrowers with bad credit, so it is worth discussing your situation with one of our advisors to see what options there are for you.

What is a secured loan used for?

Secured loans can be used to raise money for any legal purpose! Here are some of the more common purposes, although your options are not limited to these:

  • Home improvements
  • Raising a deposit to purchase another property
  • Consolidation
  • Pay for a wedding
  • New car
  • Capital injection for a business/Paying a tax bill
  • Extending the lease on a property

How much can I borrow?

It is possible to borrow up to 100% of the value of your property, although not all loan plans have such a high loan to value (LTV) ratio. Any existing debt secured on the property, such as the mortgage, needs to be included.

An example:

You have a property worth £100,000 and a mortgage balance of £60,000. If you can borrow up to 90% LTV, that means you can borrow up to £30,000.

The amount you can borrow may also be limited by how much you can afford to pay each month, or specific lender criteria.

What is a homeowner loan?

A homeowner loan is a secured loan, as you need to own a property to qualify.

What documents do I need for a secured loan?

You will need proof of identity and proof of residency, such as a passport and a utility bill. Proof of income is also required, depending on the nature of your employment this could be payslips, bank statements, accounts etc.

What happens to a secured loan after repossession?

If you do not make the monthly payments, the lender can go to court to get possession of the property.  If possession is granted, you will have to leave so that the property can be sold. The proceeds of the sale are used to repay any debt that is secured on the property in order of the charges - so the mortgage provider would be first in line to receive their money, then the second charge loan provider.

Will applying for a secured loan affect my credit score?

Just enquiring about a secured loan will not affect your credit score. If you want to proceed with a quote you are given, the lender would need to do a full credit search sometime before completion, which would leave a trace on your credit file.