Secured Loans Are Now Experiencing Real Changes

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At one time, one of the most common ways for a homeowner to raise money was to take out a secured loan, and at that period secured loans were applied for in similar numbers as remortgages.

Loans fall into two groups, and these are secured and unsecured loans with the latter in theory being available to everyone because, as their name make obvious, they need no form of asset what so ever.

Secured loans, on the contrary, do need a concrete form of collateral which is that of a property, making it so that only homeowners are eligible.

The fact that these homeowner loans are secured means that they generally have a lower rate of interest as their unsecured cousins.

Their cheap rates of interest, as well as their versatility of uses, makes it no wonder why secured loans were so popular, as until a few years ago most homeowners would fit the criteria of one lender or another.

The underwriting accommodated almost everyone who owned their own property, as all kinds of secured loan plans existed, including the 125% equity plan which enabled people to borrow up to 25% more than their house was worth.

The 125% plan was only available to employed applicants who had a totally clean credit rating, and there was no such plan available to those who ran their own business.

No matter how bad a homeowner's credit profile was, he could always obtain a bad credit loan at a maximum of 75% LTV.

When applying for a homeowner loan, employed applicants were required to produce wage slips, but one lender accepted self declarations for those in employment, in the same way that all lenders accepted self certs for the self employed.

During the last three or four years, all this slack underwriting ceased to exist, as equity margins were restricted to 75% for the employed and 60% for the self employed, with bad credit loans being only available to those who had 50% loan to value on their property and self declarations were abolished.

There were so many homeowners who no longer fitted the criteria, that both lenders and brokers suffered from such a reduction in business that they were forced to cease trading.

There is now a reversal of fortune, with real changes and improvements being experienced in the secured loan market with the increased equity margins, new loan providers and some sort of relaxation to criteria.

It is unlikely that 100% plans or more will ever see the light of day again, but with 85% loans to value available, and self employed loans with no accounts being there for the taking on a self certification basis, providing the applicant can provide bank statements, for the first time in years real changes are happening to secured loans.

Champion Finance are one of the main secured loans brokers in the UK, and have been arranging homeowner loans since 1985. They also arrange remortgages and mortgages from the entire mortgage market. Every debt solution is also available to help those in debt to become debt free.
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