The Finance Blog

A secured loan is in essence a loan that is secured against a property or asset - For most people this usually means their own home or investment property. A mortgage is perhaps the most common form of secured loan that most of us take out at some stage in our life. Mortgages and secured loans enable us to realise our dream of home ownership which would be out of the grasp of most people should such a transaction require a full upfront payment.

In the case of homeownership; the sheer size of the loan needed to purchase the property would in most cases would make it a too greater risk for the lender should there be no re-course to recover their money in the event of borrower default. The re-course in this case would of course mean property repossession. By the very nature a secured loan means that most individuals will take any reasonable measure to ensure that the payments are kept up on time and in full - Anxious of the repercussions that would occur if they were not.

The term 'secured loan' when used in the mortgage industry however refers to a second charge homeowner loan. Second charge relates to the way that the legal charge is registered against the property - This is usually second to that of a first mortgage.

Secured loans are usually arranged for those borrowers seeking extra finance who are tied into their current mortgage with a substantial early repayment fee to pay should they switch lenders. Secured loans may also be arranged for those homeowners who are looking for additional capital in a shorter timeframe than it would take to complete a remortgage application.

Of course not all borrowers have the same attitude towards debt repayment. This subsequently means that lenders assess each application on an individual basis keen to ensure that where there is a higher risk of lending to certain individuals, that they adjust the interest rates accordingly. Secured loans can be arranged for nearly every type of borrower from those with a perfect credit record to those with a poor one.

The rates of interest applicable to secured loans depend largely on your current situation. Generally these rates of interest will be slightly higher than those offered by first mortgages lenders. This difference is due to the fact that in the event of property repossession, the second charge mortgage lender would in effect, have to queue up behind the main mortgage lender and hope that there are enough monies left over to clear the balance of the loan outstanding.

  

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