Secured loans are an established part of the mortgage lending market and they can provide additional funds for clients looking to raise additional capital.
The security for second charge loans is the borrower’s existing property, and the loan is made in addition to the first charge mortgage loan with which the borrower purchased or remortgaged the property.
Typically, a second charge loan can be considered more suitable than raising money by remortgaging if one or more of the following circumstances apply:
Second charge secured loans are used for many purposes, including:
- The borrower is subject to high early redemption charges on their existing mortgage loan
- The borrower has an attractive rate on their existing loan that they do not wish to sacrifice
- The borrower has acquired some adverse credit history since taking out their main mortgage and is unable to find a remortgage deal. Alternatively, if such a deal can be found, it may be a cheaper option to borrow the additional sum as a second charge loan than to remortgage to raise the whole amount
- The borrower wants to keep the new loan separate from their main mortgage
- The borrower wants to pay off the second charge loan much sooner than the main mortgage
- The borrower wants to receive the advance sooner than a standard remortgage could deliver it
- Paying for a wedding
- Paying school/university fees
- Buying a new car
- Taking the holiday of a lifetime
- Cosmetic surgery
- Building an extension to the borrower’s residential property
- New kitchen/ bathroom
- Debt consolidation
- Most other legal purposes (e.g. raising a deposit to purchase an investment property)
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The Financial Services Authority do not regulate personal loans