Second Charge Loans

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Second charge loans, otherwise known as second charge mortgages, are a type loan secured against your property. They can be used as an alternative to remortgaging, however, before applying it’s important to understand exactly what this loan is, and the responsibilities that come with it.


What Are Second Charge Loans?

Second charge loans are a type of secured loan that use the equity from your home.

The equity in your home is the percentage of the property you own outright, and can be calculated as the value of your home minus any remaining mortgage repayments owed.

With a second charge loan, the equity from your home is secured against the loan, and used as collateral if the borrower cannot make repayments. Therefore, as with all types of secured loans, its vital to ensure you can keep up with repayments, as failure to do so can result in losing your home.


Why Take Out a Second Charge Loan?

People take out second charge loans for a variety of different reasons. Some may use second charge loans when they struggle to access other types of finance – such as unsecured loans.

Unsecured loans often require the borrower to have a stable job, regular income, and a high credit score. Those who are self-employed or have an adverse credit rating can therefore struggle to access this type of finance.

For those with a property, second charge loans may be a more suitable option, enabling homeowners to use the equity held up in their house to access finance.

Homeowners may also take out a second charge loan if their mortgage has a large early repayment charge, as a second charge loan could end up being cheaper than remortgaging.


How Much Can I Borrow?

The amount you can borrow with a second charge loan will vary depending on the lender and the details of your application (e.g. the equity you currently have in your property).

Typically, you can borrow anything upwards of £1,000. However, the maximum amount you can apply for will be subject to the equity you have in your home.

You will not be able to apply for anything above the equity of your property. This is because the amount of your home you own outright is used as collateral if you fail to keep up with repayments, and will therefore need to be equal to the value borrowed.


Who Can Take Out a Second Charge Loan?

In order to be eligible for a second charge mortgage, applicants will have to own a property, and have equity in the property that equates to the loan amount applied for.

Whilst most mortgages will usually require a variety of credit-worthy credentials, applicants with bad credit can still be eligible for a second charge loan.

Below is a list with some of the main criteria lenders will typically require:

  • Have a property to secure the loan with
  • Be over the age of 24
  • Have a working debit account 
  • Hold equity in the property 

Whilst it is still possible for those with bad credit to get a second charge loan, the eligibility criteria will vary from lender to lender. It’s important to understand any and all requirements lenders have for their borrowers before applying for a loan.


Comparing Second Charge Loans With Proper Finance

When considering any type of loan, it’s always best to compare, as this can help you find the best deals for your borrowing needs.

Proper Finance is dedicated to helping borrowers find the best finance options, comparing great deals for a range of different products, including second charge loans. You can also compare a range of other loan types through our comparison site, including the following:

  • Unsecured loans
  • Guarantor loans
  • Peer to peer loans
  • Bridging loans

Working with some of the leading lenders in the country, you can be sure that any loan you find through us is safe and secure