Secured loans in the United Kingdom are somewhat distinct and different as compared to similar loans across other nations such as the United States and Canada. Given below are interesting facts about the secured loans in the UK to provide you with a better understanding.
- In the United Kingdom, secured loans are known by numerous terms. First of all, a secured loan is any loan amount dispersed to the loan applicant after issuing some sort of tangible asset against it as security. Majority of loans in the nation are issued against security. Secured loans are known by different names such as second mortgages, future charge loans, and second charge loans.
- Secured loans formulate a second charge against your property. This means a second charge or interest is created in the property you pledge as security against the loan amount issued. For example, if you possess an unpaid mortgage, the primary lender or the mortgage lender then has a legal interest in that specific property considering you have not yet paid it off. Thus, such a procedure makes your primary lender, the first charge lender. Similarly, if that primary lender issues a secured loan against it as well, it formulates another legal interest in the property. The lender thus facilitates legal procedures and files to depict such interest, portraying them as second charge lenders as well.
- Property repossession is possible even if secured lenders are stated as second charge lenders. In cases when and where the borrower fails to reimburse the periodic payments of the borrowed funds, lenders can repossess the property pledged. Borrowers have to take extreme caution and determine whether they can sustain periodic reimbursements of the loan amounts. However, property repossession is not as standard as in the cases of first mortgage repossessions.
- Similar to when availing your first mortgage, you are required to pay specific charges. Likewise, in secured loans, there are certain fees to settle regarding loan origination, the value of the property and other legal requirements.
- Secured loans are issued primarily based on equity. This means that the amount of borrowed funds you wish to procure will solely depend on the equity value the applicant possesses. For example, if your equity is worth 50,000 pounds, you cannot borrow more than that. Lenders issue such funds based on the loan to value ratio.