The secured loan market has grown in leaps and bounds since the financial crisis. Today, it has become a huge player in dealing with the mortgage gap. Here is a look at how it has been able to achieve this.
Taking care of the self employed
Following the financial crisis, the FSA outlawed self-certification mortgages and banks had to bring in stiffer affordability checks to reduce high-risk lending. This led to massive drop in the number of mortgages given to self-employed individuals. The number has fallen more than 72% from post financial crisis years.
In the last 24 months, secured loan lenders have successfully taken advantage of this gap in the market to offer lower rates and come up with innovative products.
Experts at Loan.co.uk who offer online secured loans say “the self-employed market is one that has a lot of credit worthy individuals who are unfortunately unable to meet with extreme screening of the average bank. We are therefore offering products allowing them to borrow as much as £1m to take care of their mortgage needs”.
Providing for people with adverse credit
The mortgage market typically only takes care of people with a clean credit rating. Secured lenders on the other hand are more accommodating, offering products to consumers irrespective of what their credit ratings say. People with mortgage arrears, county court judgements etc. can all get credit.
Some of the products offered by secured loan lenders can compete with what is available on the high street. It is possible to find loans of as much as £100,000 for individuals with what will be regarded as a “fair” credit rating. There is also a wide range of products for people that will never be considered by the average high street lender.
With a secured loan, landlords can now easily make renovations to their properties to increase its value without going through the high street lending bureaucracy. They can also raise money needed to deposit on another buy-to-let property and expand their portfolios.
Some of the secured loan providers offer very competitive APRs and a high maximum loan amount, making it almost difficult for landlords to ignore the products on offer.
Dealing with interest-only mortgage
There is a limited offering of interest only secured loans available today but the interest-only mortgage market is where the secured loan providers have the biggest opportunity.
As interest-only mortgages continue to withdraw, existing interest-only customers have to deal with the tough decision of raising funds against their property as many lenders generally refuse to finance consumers unless they make the switch to a repayment mortgage. Going down the secured loan route however will save these consumers more time and money than going the complete remortgage route.