A second charge is a convenient way of borrowing money when an unsecured loan isn’t available, perhaps because of a bad credit rating. Consumers regularly take out a second charge for debt consolidation and home improvements. All second charges are registered with the Land Registry to ensure that the lender secures payment when a home is sold or repossessed.
A Second Charge for Home Improvements
Provided sufficient home equity is available, taking out a second charge or homeowner loan to carry out home improvements can increase property values. Borrowing money for a new fitted kitchen or loft conversion can be highly beneficial in the right economic climate. However, a second charge for home improvements may not increase property values in a falling market.
Unsecured Loans and Bad Credit Ratings
Borrowing money via an unsecured loan can prove virtually impossible when a bad credit rating is an issue. If an unsecured loan is granted, a high APR will be charged to underwrite the risk of loan default. However, provided sufficient home equity is available and affordability is proved, lenders will normally allow a borrower to take out a second charge or homeowner loan at a lower rate of interest.
Borrow More with a Second Charge
Very few unsecured loans are available for more than £15,000. Subject to home equity and affordability, homeowner loans are available for well in excess of £100,000. Whilst some consumers use a second charge to finance their business, others use them for home improvements and debt consolidation.
Homeowner Loans and Debt Consolidation
Those struggling with unsecured loans, credit card debt and high APR personal overdrafts are likely to find that a debt consolidation loan helps in a number of ways. A second charge allows a consumer to combine personal debts, simplifying family finances and minimising interest payments. Personal debt can also be spread over a longer period to reduce monthly repayments.
Secured Loans Can Reduce Monthly Repayments
Taking out a secured loan allows someone borrowing money to spread repayments over a longer term of up to 25 years. Although more interest will be paid over the duration of the loan, it will mean that monthly repayments will be lower each month. This can help greatly in terms of balancing household bills and ensuring affordability.
Taking out a second charge or secured loan can help consumers with bad credit to borrow money. Debt consolidation loans can lower monthly repayments and home improvement loans can help increase the value of the family home. Always remember that failing to keep up with monthly repayments on a homeowner loan can result in property repossession.