Short Term Secured Loans
Short Term Secured Loans
A short-term secured loan is, just as it sounds, a loan secured against a person's property, taken over a short-term period. If you do not keep up repayments, the lender could take possession of your property to regain their monies.
The shortest time you can take out a loan is typically three years.
What Is A Short Term Secured Loan?
Secured loans are also known as homeowner loans, second mortgages, and second-charge mortgages.
A short-term secured loan is a loan that is secured against your property, meaning that if you can’t make the mortgage payments, the lender could take possession of your property and sell it to recoup their monies.
The average secured loan is around £46,000. Lenders typically offer repayment terms of between three years and thirty years.
There are two types of repayment methods:
Capital and repayment - this is the most popular type of mortgage. With this type of loan, you make repayments over an agreed term, and at the end of that term, you will have repaid both the capital and the interest. The amount you owe reduces monthly as you repay the interest and part of the capital. The term of the loan influences the monthly repayment. The shorter the loan term, the higher the monthly repayment; the longer the loan term, the lower the monthly repayment.
Interest only - with this type of loan, you only pay the mortgage interest each month. At the end of the agreed term, you will still owe the amount you borrowed at the beginning of the loan. You will need to repay the loan, typically achieved by the borrower selling the property and moving to a smaller property, using the surplus monies to repay the mortgage. Alternatively, borrowers can take out savings plans, which allow them to repay the mortgage balance once the savings plan has matured, which generally coincides with the end of the mortgage term.
A mortgage is one of the most significant commitments anyone ever takes on. As a result, it makes sense to approach a qualified independent mortgage broker with good knowledge of the lenders for short-term loans secured against property.
You will also have the added benefit that if it later transpires that the mortgage sold was unsuitable for any reason, you can make a formal complaint to the Financial Services Ombudsman.
You need to think carefully before you apply for a secured loan because if you do not keep up repayments on your mortgage, you may lose your home.
What Can A Short Term Secured Loan Be Used For?
You can use short-term secured loans for most legal purposes.
The most popular reason people take out secured loans is to pay off existing credit cards and personal loans and have one lower monthly repayment. However, to have a lower monthly repayment, you would need to borrow over a long term of, say, fifteen or twenty years. Borrowing over a shorter period (say, three years) means the monthly payment would be higher than the current credit card and loan repayments.
Reasons borrowers take out a short-term loan secured against property:
To extend a lease
Deposit to purchase a buy to let investment
With a debt consolidation loan, the lender normally wants to settle your credit card and loan debts directly with each lender. This ensures that your current finances are fully repaid and avoids the temptation of not resolving the debts if the funds were sent straight to you.
How Can I Get A Short Term Secured Loan?
One way would be to look at an online loan calculator to compare secured loan options.
The calculator will give you an indication of the loan repayments. They can be helpful whatever your circumstances. You might be looking to obtain a loan with bad credit over a 30-year period; an online calculator will show your estimated repayments,
One way to get a secured loan is to use the services of a specialist secured loan broker.
A secured loan broker should have a minimum of a Certificate in Mortgage Advice and Practice (CeMAP) and be regulated by the Financial Conduct Authority.
The broker will have access to the leading lenders in the secured loan market and relationships with some smaller niche lenders.
The process will involve them taking a detailed fact find, which involves collecting all your personal information and asking you about your aims and what you want to achieve. For example, you might say that you want a no-ERC secured loan (that’s a loan with no early repayment charges).
The fact find will allow the broker to look at the products available, considering your personal information. They will then present you with an ESIS (European Standardised Information Sheet), which is an illustration showing details of the proposed loan. This sheet will include the following information:
The amount you want to borrow
The interest rate and whether it is fixed or variable.
Any broker fees and other fees.
If fixed, for how long?
The term of the loan.
Any early repayment charges that might be applicable.
The name and address of whom you must contact if you have a complaint.
If you are happy with the proposed product offered in the ESIS, the broker will start processing your loan.
One of the first things they do is contact the Land Registry to obtain office copies. The office copies will confirm several points, including the full names of the registered owners, the full address, how many years are outstanding on a lease (if applicable) and whether or not the broker has to approach the applicant's mortgage company to get their consent for the proposed lender to register a legal charge against the property.
The whole process of getting a short-term secured loan typically takes 4 - 6 weeks.
For more information about short-term or long-term secured loans, contact our team of experts today.