Frequently asked questions
What is a Secured Loan?
A secured loan is a loan, secured on something owned by the borrower. In day to day terms, this is usually a personal loan, secured on the borrower's home.
What does Secured Mean?
Secured means the lender has an interest in something belonging to the borrower as security. This is usually the borrower's house.
What is Equity?
Equity is the amount of value in a property, which is not encumbered by an existing mortage. For example, if a house is worth £150,000, and there is an outstanding mortgage of £60,000, the equity is £90,000.
Can I borrow up to the full amount of the equity?
No, not usually. The lender has to have some protection against the house having to be sold for a lower price during adverse market conditions, so there has to be a margin of safety, both for the lender and the borrower.
How is the maximum available loan calculated?
The lender will have a range of lending criteria, usually up to 90% of the property value for people with a good credit history. In the 90% example, if a property is worth, say, £200,000, then 90% would be £180,000, which would be the maximum borrowing the lender would be prepared to go to on this property. This is sometimes known as the loan th value (LTV).
From this £180,000 would be deducted any existing mortgages, so if there was an outstanding mortgage of £80,000 from the original loan to buy the house, then a further advance of £20,000 to build an extension, the total mortgage borrowing of £100,000 would be deducted from the £180,000, making the maximum further loan available £80,000.
In cases where there is a poor credit history, the maximum percentage could be a lot less than the 90% in the example.
What does Poor Credit History mean?
Poor credit history, often known as adverse credit history, means the potential borrower has had some previous incidents relating to earlier debt recorded in their credit file.
This may have been just one or two late or missed payments on credit cards, which can often be ignored, to more severe action, such as repossesssions, or County Court Judgements against them.
Where there is equity available in property, it may still be possible to arrange a loan, even in cases where there is quite a bad credit history.
What is a CCJ?
A CCJ is a County Court Judgement. This is the legal result of a lender taking a borrower to the County Court to try to obtain settlement of an outstanding debt, on which the borrower has defaulted.
Although this would usually make it difficult to obtain further credit in the future, it os often possible to arrange a secured loan, provided there is available equity in property and there are suitable explanations for the bad credit history, and satisfactory proof that any future repayments can be met, including any additional borrowing arranged.
A poor credit history can often be explained, for example a young person getting into difficulty with credit cards, a former overspending partner, redundancy, etc. Provided the lender is satisfied that all outstanding actions have been concluded satisfactorily, and the situation has now been resolved, ot is usually possible to arrange a loan.
What is Negative Equity?
Negative equity is the situation where the total of all loans secured on a property is more than the value of the property itself. This is usually the result of a drop in property prices at a ntime when a borrower is fully commited to borrowing on the strength of the value of the property.
This means it would not usually be possible to arrange further borrowing secured on the property, as there is equity available to cover it.
Negative equity is not always a problem, of course, if the borrower can afford to keep up the existing repayments and doesn't have to sell for any other reason, then they can just keep paying the mortgage and wait until the value of the property rises over time, top cover the loans again.
What is an Unsecured Loan?
An unsecured loan is a loan which is not connected to ownership of property, so no equity is needed. Examples of unsecured loans would be personal loans taken out with the bank, for buying a car for example, or a loan from a finance company, without any security.
What is a Payday Loan?
A Payday loan is a very short term loan, intended, as the name suggests, to tide you over until payday.
What is APR?
APR is the Annual Percentage Rate of charge on a loan. This is a way of comparing one loan with another. The APR isn't just the interest rate on the loan, it is adjusted for other factors such as how you repay the loan, the length of term of the loan, the frequency and timing of re payments, and the amount of each repayment, certain fees relating to the loan and the premiums for any compulsory payment protection insurance.
Every lender must tell you what their APR is before you sign an agreement. It will vary from lender to lender. Generally, the lower the APR the better the deal for you, so if you are thinking about borrowing, shop around, or use a service such as Omnial Loans, who will assess loans available from a number of lenders for you.
Are accounts necessary for Self Employed borrowers?
No, it is recognised that at certain times in the life of a business, particularly in the early years, the historical accounts for previous years may noit reflect the true financial position, so actual income may now be higher than the last prepared accounts for the previous years.
It is often possible to arrange a loan on a self-certified basis. This means the borrower signs an agreement to say what the current income is, and the loan can be arranged on that basis.
How long will it take to arrange my loan?
From your initial enquiry to completion (paying you the money) it usually takes about three weeks in all.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT
MISSING PAYMENTS WILL HAVE SEVERE CONSEQUENCES AND MAY MAKE OBTAINING CREDIT MORE DIFFICULT IN THE FUTURE
See website www.omnialloans.co.uk for Typical APR
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