How to Qualify for a Secured Loan in the UK

Despite the Bank of England setting base rates at just 0.5%, the cost of borrowing money has risen in recent years. This is largely due to rising unemployment and default rates amongst existing borrowers. In order to get a low rate homeowner loan, you're going to need to prove to the lender that you're a good credit risk. The banks don't want any more bad debt on their books.

Home Equity

In order to get a secured loan in the UK, you're going to need to have sufficient equity in your property. If you want to ascertain how much equity you have, deduct the value of your secured loans from your property valuation. For example, if your house is worth £100,000 and your mortgage is £60,000, your LTV is 60%.

Credit Profile

Lenders want to be 100% sure that they're able to recover their money if you default. Not surprisingly, they've tightened their eligibility criteria in recent years. If you want to get a homeowner loan, your credit profile must be a good fit for that lender. If it isn't, you don't apply to that bank. Every time you apply for credit, a search is recorded for the next 12 months.

A secured homeowner loan is available to people with bad credit from companies, such as Ocean Finance and Kensington Home Loans, albeit through an intermediary. It's important to note that applicants with a low credit score will pay more for a secured cash loan. This is referred to as personal pricing.

Before applying, it's essential that you take steps to enhance your creditworthiness. Adverse credit will be visible to any creditor that performs a credit search for the next six years. Your local bank, such as Barclays, Lloyds TSB and HSBC, prefer to deal with applicants with a good credit history.

Employment Status

It's essential that you're in permanent employment. All loans for homeowners are a long-term financial commitment of up to 25 years so you need to demonstrate stability of income. If you're unemployed, still in your probationary period or have a temporary contract, your application for credit will be declined.

If you've experienced credit problems or want to find the best rate secured loan, it's advisable to use an intermediary. They aren't tied to any one company and can trawl the entire market for the lowest rate in return for a small fee.

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