Secured loans have been in the market for more than thirty years, but there are a number of changes in recent years.
One aspect that has remained constant is what a secured loan actually is, and what it in fact is, is a homeowner loan that requires the asset of the equity of a property.
For those who are not acquainted with the meaning of the word equity, it is essential to point out that it is the sum left once the mortgage balance is deducted from the value of the property.
So saying, if a property is worth £220,000 and the mortgage balance is £100,000, the equity in this case would be £120,000.
This however does not mean that a homeowner can obtain a secured loan of £120,000, as lenders all have different margins of acceptable equity.
Since the inception of secured loans, the equity accepted by most loan providers was in the region of 80% to 90% LTV, with the exception of several years prior to the credit crisis, when a number of lenders granted homeowner loans of up to 125% LTV.
These lenders included such well known names as First Plus, E.
P.
F.
and Paragon, the first two having completely ceased trading, and the latter only gives further advances to existing borrowers.
It is unlikely if we will ever again see 125% secured loans because, as recent history shows, when property prices fall, disaster ensues for their providers.
For some time over the last few years, equity margins were reduced to 65% for self employed loans and 75% for those who are in employment, meaning that many fewer people were able to a get a secured loan, not only due to the restricted equity but also due to the fact that property values had decreased.
For some time it was almost impossible for a homeowner to obtain a secured loan if he did not have a perfect credit profile.
It was entirely different before the credit crisis, when almost anyone with an available equity of 75% could obtain a homeowner loan even if they had defaults, CCJ's and mortgage arrears registered against them.
A few years ago, it was possible for all self employed, and in some cases employed applicants, to simply declare their own earnings without any back up proof, but all that disappeared.
This all meant that the self employed, as well as the employed who received their income in cash, found it almost impossible to obtain an often much needed loan.
Recently matters have improved, and homeowner loans are now in the market at 90% LTV with the drawback that these partcular loans have high rates of interest and a maximum loan value of £15,000.
Nevertheless it is not all gloom and doom in the secured loans sector, as there are loans available up to £100,000 at good rates of interest.
Equity margins have been increased to 85% for those in employment, and to 75% for the self employed, while professional self employed can obtain a loan up to 80% LTV.
With the improvements to the criteria as well as the slight improvement of the value of property, makes now as good a time as any for those homeowners needing to raise money to make an application for a secured loan.