Is it Possible to Get a Secured Loan with Little Equity?

With many lending institutions offering secured loans of up to 125 per cent of the value of your home it is possible to get a secured loan with little equity. However, be careful that you are not borrowing more than you can afford to repay, or you could lose your home.

With the significant rise in house prices in Britain over the last ten years many homeowners have significant equity on their properties. However, this is not always the case. If you have little or no equity on your home you should still be able to get a secured loan.

Many lenders offer secured loans up to 125 per cent of the value of the home, less any amount outstanding on your mortgage. So even if you borrowed 100 per cent of your home's value you should still be able to borrow up to the additional 25 per cent. However, you should look carefully at your finances before making such a decision. Borrowing beyond your home's value would see you heavily in debt and you could lose your home if you fail to keep up with mortgage and/or secured loan repayments.

If you do opt to borrow the extra 25 per cent it would be wise to take out some form of payment protection insurance on your secured loan in case you are made redundant or become ill. Also be prepared for interest rises or a fall in the value of your property.

If you have little or no equity in your home and your mortgage has a high loan to ratio value, you are unlikely to be offered a secured loan for a very large amount. Because of this, a better option for you might be an unsecured loan. You will have to pay a higher interest rate on this but you will have the peace of mind that your home can not be repossessed if you miss repayments. Unsecured loans are generally available up to about £20,000.

If you do decide on a secured loan it is vital that you keep up with repayments. If you feel you may miss a repayment for any reason you should contact your lender immediately. Most lenders will be appreciative that you are being proactive and reduce or even suspend repayments until you get back on your feet.

While it is possible to get a secured loan with little equity, it is not a decision to be taken lightly. Borrowing beyond your home's value is best avoided if possible, but if you must do it be sure you can keep up with repayments.