Category: secured-loans

Equity release has risen in popularity over the past few decades, however, it has also received some negative press regarding consequences years down the line following taking out such a financial policy.

In this guide, we will explore what equity release is, the types of equity release as well as the pros and cons of this type of financial product.

What is Equity Release?

Equity release is the method of withdrawing the equity owned from property to turn it into a cash lump sum, a source of regular income, or a combination of both.

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Following undertaking an equity release, the homeowner can continue to reside in the property up either until the sale of the property, the move into a care home, or death.

Usually, the capital plus interest due to the equity release financial product is repaid by selling the property.

Equity release is usually only available to those over 55 years old and a mortgage does not need to be fully repaid on a property to be able to explore equity release as an option.

There are no repayments due on the financial product until the sale of the property which can be appealing however there can also be disadvantages of this type of financial decision.

Legislation of Equity Release Financial Products

Following a period of negative press regarding equity release products, the market was tightened and a regulation body, The Equity Release Council, was established. Following this change, the reputable companies offering equity release products have become members of the council.

Types of Equity Release

There are two types of equity release products available on the market:

• Lifetime mortgage – A lifetime mortgage is the most common type of equity release product. It is the process of obtaining a secured mortgage against the main residential property.  The lifetime mortgage holder continues to own the property and often continues to live within the property until the sale or death, whichever comes sooner, at which point the mortgage capital and interest due is settled.
• Home reversion – This option involves part or all of the property being sold to a home reversion provider in exchange for a lump sum or regular payments. The person concerned continues to live within the property however there is an agreement to maintain and ensure the dwelling.  A percentage value of the property can be ring-fenced for later use, such as inheritance, however, once the property is sold, the home reversion company will receive the proceeds of their share.

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Advantages of Equity Release

Equity release is continuing to see a sharp increase in popularity due to the many advantages it offers, these include:

• Tax-free Cash – Any money released with an equity release plan is tax-free. It enables you to gain access to a lump sum of money, a regular income, or support your pension.
• You can stay in your home – One of the main benefits of equity release is that you are able to stay in your property, this beats the typical route of having to sell and downsize. This is a perfect option for those who want to avoid the inconvenience and stress of moving.
• Fixed interest rates – The interest rates on equity release loans are fixed for the entire term of the loan, which provides the security that you will know exactly how much you owe at the end of the loan period.
• No monthly repayments – If you want to avoid monthly repayments, you can with equity release. The total amount is paid off in full when your property is sold after you pass away, move into a full-time care facility, or sell the property.

What are the Disadvantages of Equity Release?

Although very popular, equity release can have negative consequences such as:

• Negative equity – Consequences of utilising an equity release product before tighter regulation of such products was introduced was that some homeowners found themselves in a negative equity situation. Negative equity occurs when the total amount owed to lenders is higher than the property value.  This can occur during periods when property prices have crashed.  However, following the establishment of the Equity Release Council, the member companies now offer a no negative guarantee to remove this risk.
• Cost – The costs involved with equity release products can vary between equity release lenders, however, depending on the duration of time that the financial product is in place for, and the option is chosen regarding either paying accruing interest regularly or rolling the interest liability up until the end of the policy, the costs can escalate. Due to the variables involved it is always worth calculating the total costs of equity release products before committing to ensure that it is viable. It would also be worth seeking independent financial advice to discuss the costs involved against other options to ensure that an informed decision is made before committing.
• Income Tax – Depending on the amount drawn from equity release products, as well as other personal circumstances, there could be income tax implications and therefore it is important to seek independent financial advice or specialist tax advice to establish any possible tax liabilities before committing to an equity release product.
• Loss of means-tested benefits – Depending on the personal circumstances of the applicant and the amount of equity release that they are seeking to draw upon, they could lose access to means-tested benefits. Should there be any concerns regarding benefit access and eligibility, exploring the government website or seeking advice through citizens advice would be the best approach to find out more information?
• Loss of Inheritance – The amount of inheritance available to pass onto family members from a property with an equity release policy secured to it will be reduced. The level of the reduction will depend on; the amount of loan taken through the equity release, the interest rate and the method chosen to repay the interest, as well as the property prices at the time of sale. Not all of these factors can be planned for although some equity release products allow a percentage of the property value to be ring-fenced for passing onto family through inheritance. Due to the nature of the ramifications for other family members, it is strongly advised that homeowners seek independent financial advice ahead of any equity release applications.

Find a mortgage today

Equity Release Companies to Avoid 

Should an equity release product be the most appropriate financial option and a homeowner is ready to apply, a check should be undertaken to ensure that the chosen lender is a member of the Equity Release Council.

There are many companies on the market offering equity products however for the most protection, always avoid those who are not members of the Equity Release Council and therefore do not offer:

• A ‘no negative equity’ guarantee.
• Protection to vulnerable customers.
• Sensible, competitive interest rates.
• Sensible early settlement fee structures.
• Fixed interest rates.
• The right to remain on your property for life.
• The right to move to a different property.

Equity Release Companies to Avoid Summary

Although the equity release sector has faced significant tightened legislation over recent years, there are still many factors to be considered and fully understood before committing to such a financial product.

In addition, other lending options may wish to be explored and compared before selecting a choice, and therefore it is always worthwhile to seek independent financial advice for support in researching and pricing the various options available.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

Equity release has risen in popularity over the past few decades, however, it has also received some negative press regarding consequences years down the line following taking out such a financial policy.

In this guide, we will explore what equity release is, the types of equity release as well as the pros and cons of this type of financial product.

What is Equity Release?

Equity release is the method of withdrawing the equity owned from property to turn it into a cash lump sum, a source of regular income, or a combination of both.

Find a mortgage today

Following undertaking an equity release, the homeowner can continue to reside in the property up either until the sale of the property, the move into a care home, or death.

Usually, the capital plus interest due to the equity release financial product is repaid by selling the property.

Equity release is usually only available to those over 55 years old and a mortgage does not need to be fully repaid on a property to be able to explore equity release as an option.

There are no repayments due on the financial product until the sale of the property which can be appealing however there can also be disadvantages of this type of financial decision.

Legislation of Equity Release Financial Products

Following a period of negative press regarding equity release products, the market was tightened and a regulation body, The Equity Release Council, was established. Following this change, the reputable companies offering equity release products have become members of the council.

Types of Equity Release

There are two types of equity release products available on the market:

• Lifetime mortgage – A lifetime mortgage is the most common type of equity release product. It is the process of obtaining a secured mortgage against the main residential property.  The lifetime mortgage holder continues to own the property and often continues to live within the property until the sale or death, whichever comes sooner, at which point the mortgage capital and interest due is settled.
• Home reversion – This option involves part or all of the property being sold to a home reversion provider in exchange for a lump sum or regular payments. The person concerned continues to live within the property however there is an agreement to maintain and ensure the dwelling.  A percentage value of the property can be ring-fenced for later use, such as inheritance, however, once the property is sold, the home reversion company will receive the proceeds of their share.

Find a mortgage today

Advantages of Equity Release

Equity release is continuing to see a sharp increase in popularity due to the many advantages it offers, these include:

• Tax-free Cash – Any money released with an equity release plan is tax-free. It enables you to gain access to a lump sum of money, a regular income, or support your pension.
• You can stay in your home – One of the main benefits of equity release is that you are able to stay in your property, this beats the typical route of having to sell and downsize. This is a perfect option for those who want to avoid the inconvenience and stress of moving.
• Fixed interest rates – The interest rates on equity release loans are fixed for the entire term of the loan, which provides the security that you will know exactly how much you owe at the end of the loan period.
• No monthly repayments – If you want to avoid monthly repayments, you can with equity release. The total amount is paid off in full when your property is sold after you pass away, move into a full-time care facility, or sell the property.

What are the Disadvantages of Equity Release?

Although very popular, equity release can have negative consequences such as:

• Negative equity – Consequences of utilising an equity release product before tighter regulation of such products was introduced was that some homeowners found themselves in a negative equity situation. Negative equity occurs when the total amount owed to lenders is higher than the property value.  This can occur during periods when property prices have crashed.  However, following the establishment of the Equity Release Council, the member companies now offer a no negative guarantee to remove this risk.
• Cost – The costs involved with equity release products can vary between equity release lenders, however, depending on the duration of time that the financial product is in place for, and the option is chosen regarding either paying accruing interest regularly or rolling the interest liability up until the end of the policy, the costs can escalate. Due to the variables involved it is always worth calculating the total costs of equity release products before committing to ensure that it is viable. It would also be worth seeking independent financial advice to discuss the costs involved against other options to ensure that an informed decision is made before committing.
• Income Tax – Depending on the amount drawn from equity release products, as well as other personal circumstances, there could be income tax implications and therefore it is important to seek independent financial advice or specialist tax advice to establish any possible tax liabilities before committing to an equity release product.
• Loss of means-tested benefits – Depending on the personal circumstances of the applicant and the amount of equity release that they are seeking to draw upon, they could lose access to means-tested benefits. Should there be any concerns regarding benefit access and eligibility, exploring the government website or seeking advice through citizens advice would be the best approach to find out more information?
• Loss of Inheritance – The amount of inheritance available to pass onto family members from a property with an equity release policy secured to it will be reduced. The level of the reduction will depend on; the amount of loan taken through the equity release, the interest rate and the method chosen to repay the interest, as well as the property prices at the time of sale. Not all of these factors can be planned for although some equity release products allow a percentage of the property value to be ring-fenced for passing onto family through inheritance. Due to the nature of the ramifications for other family members, it is strongly advised that homeowners seek independent financial advice ahead of any equity release applications.

Find a mortgage today

Equity Release Companies to Avoid 

Should an equity release product be the most appropriate financial option and a homeowner is ready to apply, a check should be undertaken to ensure that the chosen lender is a member of the Equity Release Council.

There are many companies on the market offering equity products however for the most protection, always avoid those who are not members of the Equity Release Council and therefore do not offer:

• A ‘no negative equity’ guarantee.
• Protection to vulnerable customers.
• Sensible, competitive interest rates.
• Sensible early settlement fee structures.
• Fixed interest rates.
• The right to remain on your property for life.
• The right to move to a different property.

Equity Release Companies to Avoid Summary

Although the equity release sector has faced significant tightened legislation over recent years, there are still many factors to be considered and fully understood before committing to such a financial product.

In addition, other lending options may wish to be explored and compared before selecting a choice, and therefore it is always worthwhile to seek independent financial advice for support in researching and pricing the various options available.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

Exploring finance options later on in life can be tricky, especially direct from the high street lenders, as they often deem those over 60-year old to be at higher risk.

The risk element is often due to two factors; an assumption of limited income and age. Therefore the terms offered on loans are often not very competitive compared to standard mortgages available to the younger age groups.

Should a retired person find a secured finance option and be successful with an application, often the duration of the loan could be considerably shorter depending upon age and income.

However, the financial market has been diversifying over recent years and is also more understanding that each case is unique, with every borrower having different requirements and backgrounds.

Benefits of Loans for Pensioners

At retirement age, it’s relatively common for individuals to have a lot of their finances locked up in assets.

In these circumstances, it’s common to want cash for the likes of holidays, home improvements or maybe a new car, which is where a secured loan can come in incredibly useful.

Equity release is another potential option, yet the terms of a loan are often more favourable, especially if you have a good credit history.

If you do have poor credit, you may also be interested in reading our guide on instalment loans for bad credit.

However, when applying for a loan, you need to demonstrate that you can pay it back. This is typically done by showing proof of income, but what do you do if you’re no longer employed? What else do lenders accept?

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What income is accepted?

Thankfully, there are many different forms of income that are accepted when applying for a pensioner loan, these include the following:

• State pension
• Personal pension
• Employer retirement benefit
• Rental income from a buy-to-let property
• Dividends
• Income from a part-time job

As you can see, there are many forms of income that can be used as part of your application and you can use a combination to demonstrate your ability to repay the loan.

If you are in receipt of disability benefit, this can also be used, but housing benefit is not recognised as a suitable form of income.

Read our complete guide on how do secured loans work? 

How to Apply for a Pensioner Loan

When you want to make an application, it makes sense to compare all the latest loan deals available that meet your eligibility criteria. There are many ways to make an application and it can be done over the phone, in person or online.

You can apply for a loan today and receive assistance from a loan broker by using this form.

In order to make an application, the loans broker will ask for some personal information, this will include the following:

• Personal details
• Proof of income
• Information on any current debts you have

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

Homeowner Loans for Retirees

A retired person may wish to consider a secured homeowner loan for many reasons such as; to undertake developments within a property or to make other investments that would have a higher return than the cost of the borrowing.

It is often recommended to retired people that instead of dipping into retirement savings, other options of financing should be explored, especially during times of low-interest rates.

However, always be mindful that secured loans are held against current assets such as property, and therefore should the repayments not be kept up, the asset could be at risk from possession by the lender.

Specialist lenders are often approached to explore the wider market.

Considerations Before Applying

As with any financial decision, it is recommended to ensure that plenty of research is undertaken before committing to an option.

As mentioned, typically the high street may not be the most competitive lending market to the older borrower and therefore by approaching a broker, all options can be explored to find the most suitable option and the best prices.

Before applying for any suitable financial product it is worth considering the following:

• Ensure the accuracy of a credit report – Request a free report to check it for errors. This credit history report will be used by lenders when reviewing an application and therefore is vital that it is correct.
• Consider how much borrowing is required – It is advisable to only borrow what is needed for the project or purpose of the lending, over the shortest duration affordable to keep interest payments down. This also will allow a financial review period sooner, following a shorter duration of the loan.
• Check the chosen option for age restrictions – Each lender will set their age restrictions on borrowing, so it is worth checking this before applying.
• Accurately calculate living costs – During the application process, a lender is likely to request the living costs and other expenses that an applicant has outgoing each month to ensure the loan is affordable. Having this information in advance will save time later on.

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Lenders Criteria for Retired Persons

Specialised lenders may consider a secured loan application from a retired person on a case by case basis, reviewing each applicant against its borrowing criteria within the following elements:

• Age – The applicant’s age both at the time of the loan application as well as the age at the planned end of the loan
• The credit score of the applicant
• Income and affordability – The total monthly income of the applicant, which can be from multiple sources such as a pension and a part-time wage or rental income and dividends
• Equity – The amount of property equity or the total value of other assets

Each lender will have its loan eligibility criteria for all of the above elements including a maximum age that they will lend to, to commence a loan, as well as the age when the loan is due to be repaid.

Other Financial Options for Pensioners

As well as secured loans, an array of other unsecured financial products are available for the older borrower including credit cards, mortgages, equity release mortgages or car finance.

However, often the interest rates offered on unsecured borrowing are higher due to the risks borne by the lender.

The suitability of any of the above options would depend on the purpose of the desired borrowing, the duration of the financial agreement and the costs involved. Seeking independent financial advice may assist with streamlining the relevant option and comparing the best deals available.

In addition to lending options, a pension drawdown could be possible. However, any drawdown taken from a pension pot will affect the overall value of the pension, and subsequently the income that the pension pot could provide.

Therefore, any considerations of such options should be discussed with an independent financial advisor to ensure that this is the right approach for the pensioner and that the consequences are fully understood before committing.

Secured Loans for Pensioners Summary

As with any financial decision, it’s always recommended to seek independent financial advice before committing, to ensure that all terms are fully understood.

Independent brokers will also have access to the whole of the market, rather than just high street lenders which will often reveal a range of options and competitive prices.

Should you be seeking a secured loan within the following categories, approach a specialised broker for personalised service and to discuss the options available:

• Loans for those up to age 85.
• Loans accepting pensions as acceptable income.
• Loans accepting benefits and disability living allowance as approved income types.
• Alternative equity releases financial options.

However, remember that all secured homeowner loans will have consequences to owned assets if the repayments are not kept up.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

Further reading:

• £20,000 loans with bad credit.
• Instalment loans for bad credit.
• £10,000 loans for bad credit.

If you are a property owner and need to borrow money but bad credit is preventing you from doing so, a secured loan could be the right option for you.

A secured loan can allow you to use your property as collateral, opening up a lot of possibilities for you!

However, secured loans do come with risks and also have some general requirements that must be met before an agreement can be made.

This article will give you information that you need to know about obtaining a secured loan, and how our expert secured loan brokers can help you along the way.

How Does a Secured Loan Broker Work?

The difference between taking out a secured and an unsecured loan is the use of your assets as collateral.

Unsecured loans are also simply known as personal loans and come in two forms:

• Opening a line of credit (such as credit or store cards).
• Fixed interest loans (such as students loans and personal loans).

To be eligible for unsecured loans, you don’t necessarily have to be a property owner or have a mortgage but they are dependent on your credit rating, and it does usually need to be fairly good.

With that being said, if payments were missed or defaulted under an unsecured loan, the lender is unable to automatically resort to reclamation through property seizure but will have other routes, such as through legal means, to reclaim the money that was borrowed.

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Without the collateral providing security to the lender, an unsecured loan will tend to have higher interest rates than that of a secured loan and missed payments can be more unfavourable as they can incur higher fees and negatively affect your credit rating.

This, in turn, can lead to making it more difficult to obtain credit in the future.

Secured loans (also known as homeowner loans or 2nd charge mortgages) on the other hand, do use the property as collateral and as mentioned above, is a great option for those with a poor credit rating, as the lender has security in the equity of the property being used making it less risky for them.

However, the major risk for you when it comes to this, is that the lender will have legal rights to repossess your home if you have not been keeping up with your repayments. This is doubtlessly a severe consequence for some, so you have to make sure you are certain before taking out a loan against your assets.

Read our complete guide on how do secured loans work? 

Types of Secured Loans

There are various types of secured loans available, here are some of the most common:

Second Charge Mortagages

A second charge mortgage also referred to as a secured homeowner loan enables you to use the equity in your home as security for a loan. Essentially, it means you have two mortgages on your home. The equity is the percentage of your property owned by you i.e. the value of your property minus any remaining mortgage.

Buy-to-let

If you have a buy to let property, you could potentially use the equity as security for the loan. This is a common scenario, by which people may fund a new project.

Residential

Are you a regular property owner who wants to secure finance, a secured loans broker may be able to help. Give us a call on 03330 90 60 30 for a no-obligation chat.

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

Secured Loans Broker – What can they do? 

If you decide that you would like to look further into the types of secured loans available and compare what options are best for you, there are two main ways of going about this.

The first is to contact a secured loans broker, like us, whom you will be able to speak to on a personal level and have a conversation regarding what options are available to you.

The other option is to take a look at online comparison websites, which will take into account the offers that are available, giving you a wide array of choices, but it may be more difficult to find something specific for your circumstances.

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It’s much more efficient and easier to speak to a professional who knows exactly what to look for and can tailor a solution that fits your needs.

Searching for a secured loan by yourself is no easy task and, as you may already know, the vast array of choices can be a little overwhelming. Our secured loan experts will be able to effectively filter the options on your behalf, taking most of the work out of your hands and streamline the whole process.

Can I Get a Homeowner Loan with Bad Credit?

In general, the main requirement is that you already have ownership of a property or an existing mortgage and enough equity available to warrant the amount that is being borrowed.

It’s also worth mentioning that a secured loan is an alternative to a further advance if you want to avoid early repayment charges when switching between lenders.

If you are concerned about whether or not you’ll be eligible for a secured loan with bad credit,  our experts can help you along the way and will consider credit histories which include the following:

• Late payments and defaults.
• Low credit score or no credit history.
• Mortgage arrears.
• Debt management plans.
• County Court Judgements (CCJs).
• Individual voluntary arrangement (IVA).
• Repossession.
• Bankruptcy.

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You may also be interested in reading our guide on instalment loans for bad credit.

Secured Loans Broker- what factors are considered?

When taking out a secured loan there will be several considerations to make that a secured loans broker will also want to discuss with you during your conversation. As taking out a homeowner loan is a significant decision to make, it would be wise to know where you stand and think about the following:

• Loan Term – This is simply the length of time you want to spend making repayments. The shorter the loan term, the greater the monthly repayments will be but also the lower the interest repaid will be and vice versa.
• Interest Rates – The interest rate can depend on several factors including the loan term, the amount borrowed, your credit score and the collateral being offered.
• Your Financial Status – When choosing a loan, you should really know where you stand when it comes to your financial situation in regard to what you can afford in repayments and interest. Keep in mind that with your property as collateral, if you are unable to make repayments you may be at risk of losing your home.
• Loan to Equity Ratio – The more equity available on your home, you are likely able to borrow more. Equity is the amount of mortgage you have paid from the total value of the property and this is the amount considered recoverable by the lender if you were to default on payments.

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Secured Loans Broker – How Can We Help?

There’s no doubt that homeowner loans are great for those with bad credit but as mentioned previously, taking out a secured home loan is a major life decision that’s not to be taken lightly and nobody should have to make that choice alone!

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

Further reading:

• £20,000 loans with bad credit.
• Instalment loans for bad credit.
• £10,000 loans for bad credit.