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What you need to know about secured loans for the self-employed
Loan options for self employed
If you are self-employed and you have had to get a mortgage then you will be more than aware of how much evidence you need in order to be able to convince a lender to provide you with a loan. If you do not have this evidence you will find that lenders will not be prepared to provide you with a loan as they will perceive you to be too big of a risk. Therefore if you are attempting to get a loan in order to improve or expand your business you may find that you struggle to get the loan you want.
If you cant get an unsecured personal or business loan
If you are a homeowner and you don’t have the documentation of proof of income that you need in order to get an unsecured loan there is an alternative option you can take. You could potentially take out a secured loan that uses your home as security. This then makes it a far less risky option for lenders as there is something that they can use in order to get their loan back should you not be able to maintain the payments. However you do need to be aware this is a more risky option for you as you will not only have your mortgage secured against your home, you will also have your loan secured against it as well and so you will have to ensure that you maintain your payments for both.
What interest rates can I expect to pay?
The interest rates you will pay will very much depend on the loan amount you want, the term over which you will repay the loan, and also your personal financial situation. If you have a good credit history you are going to be able to get better loan deals than if you have a poor credit history. The lowest rates available on this sort of loan sit in the 5-6% area, and the higher rates can be anything up to 20%.
What proof of earnings or income is required?
For self employed applicants lenders will need proof of your income to ensure that you can afford the loan repayments. These may either be in the form of SA302 documents from HMRC or your accountant and/or you business or company accounts. Some lenders may also ask for details of your accountant so that they can verify any income claims you make.
Buy to let applicants have a small selection of options that allow you to take out a buy to let loan without proof of income. This product is ideal if you can’t proof your income, are self employed or work on a low income.
Dont jump in with both feet
If you are planning an expansion or your business, or even just raising the capital to start your brand new business, you will need to make sure that your investment is going to pay off for you so that you will be able to repay your loan. Being fully aware of your business, the potential for growth, the current market in your area of business, you actual or projected annual turnover are all things you will have to be able to take into consideration when considering your business loan. This is because you do not want to be in the position where you take out a large loan, only for your business not to improve its annual turnover. Many business loans, even if they are secured loans against your home, will require you to provide justification for taking out your loan in the same way as people who take out homeowner loans are required to do.
Go and see an expert
Although a secured loan is a loan rather than a mortgage, it is secured against your home and so has far more in common with a mortgage than a personal loan. Therefore you can find advice on the loan options available to you through a broker who specialises in providing secured loan products for self-employed people. When it comes to the self-employed, many loans are provided on an individual application basis and this is where a broker is vital as you are likely to miss out on a number of deals if you rely on internet searches only for information.
If you’re unsure which self employed loan is right for you or you need some guidance on homeowner and secured loans then speak to our experts on 0161 820 8099.
Their friendly advisors will be happy to discuss which options are available and to answer any questions you may have.