Secured loans are commonly used in the UK by property owners and landlords as a fast and easy way of raising money quickly for an emergency or for some short to medium term need. They will cost a bit more than a normal high street personal bank loan but because the loan is secured on the property the secured loan lender will have less risk of default and will often lend to people who have a less than perfect credit history.
What is an expat secured loan?
A secured loan is essentially a second charge mortgage which will enable a homeowner to borrow higher than normal amounts of money than a personal loan from a bank. £25,000 and upwards are the norm but often secured loans are arranged from as low as £10,000. Because the loan is secured on the equity held within the property, your home is the lenders security for the repayments and will be at risk if you fail to make your payments on time.
Reasons to choose an expat secured loan
- Property upgrading – You may wish to upgrade your home but don’t have funds readily available and don’t want to re-mortgage the property and cannot raise enough through a personal loan. Applying for a secured loan could provide you with the funds you need.
- Protect your expat mortgage – your mortgage may still be in its tie in period and to change it would attract large fees from your lender. Using a secured loan will allow your mortgage to remain unchanged yet you could obtain the money you need through a second charge on the property such as a secured loan.
- Credit problems – if your credit rating has slipped for any reason it may be they you will be unable to raise money by re-mortgaging your property in the normal way due to your lenders changing lending criteria. A secured loan obtained as a second charge on the property will avoid the need to re-mortgage the property and could release the funds you need.
- Short term secured loan – perhaps you know you will be able to repay a secured loan over say five to ten years yet you mortgage has 25 years to run. Obtaining money though re-mortgaging could cost you more in interest repayments due to the longer term of the mortgage. Although a secured loan may be more expensive to arrange initially having it for a much shorter repayment term could save you money.
Lending requirements for secured loans
Secured loan lenders will require you to meet their criteria requirements. These can vary slightly between lenders and need to be considered carefully. Some of the more important things are listed below.
- Credit history – the secured loan lender will check your credit history through one of the credit companies such as Equifax. Your credit rating will be used to decide if you are a good risk for the loan required but even if your credit rating isn’t perfect you may still qualify for a secured loan as it will be secured against your property.
- Correspondence address – this is important especially for expats who spend most of their time overseas. If you don’t have a correspondence address in the UK you should arrange to use your parents address or a close family member address. This needs to be someone you can trust as important documents will be in their care. To be eligible for a secured loan you will usually have to show you have had a UK address for at least three years. Having this will increase the chance that your application being approved.
- Secured loan repayment plan – the secured loan lender will look for proof that you will be able to afford to repay the loan. Even though the loan will be secured against your property, proving your ability to afford the loan repayments will be necessary.
- Identity – Proof of identity will be required in much the same way as it would for a normal mortgage,
Considerations before applying for a secured loan
Taking out a secured loan is a financial decision that should not be taken lightly. Some things to consider are:
- Financial risk - you will be putting your home or other assets on the line as security for the loan and these assets will be at risk if you fail to meet the repayments.
- Early secured loan Repayments - paying back your secured loan early may seem like a good idea but some lenders may charge an early repayment fee if you do making the whole thing too expensive.
- Multiple secured loan applications – avoid making a lot of secured loan applications as this can adversely affect your credit rating. Using an experienced secured loan broker will not only give you access to the whole secured loan market but should ensure that the most suitable secured loan for you is obtained. Many people do not realise that making multiple applications for mortgages and secured loans with different lenders can reduce their credit rating.
- Secured loan term - secured loans can be typically repaid over five to twenty five years. Where smaller repayments over a longer period may seem an attractive option to keep your costs down, because interest would be paid over a longer term you may actually end up paying more in interest overall.
Expatriates.co.uk can put you in touch with suitably qualified and experienced secured loan brokers who should be able to guide you through the process and give you transparent information about any fees that apply to your secured loan.