Credit History & Secured Loans

By: Liam G

With a great percentage of UK residence now in some degree of debt, consolidation is becoming more and more popular.

One of the most common methods of loan consolidation is to roll all outstanding debts into one monthly payment in the form of a secured loan. This amount is then secured against the value of the borrower's home.

Due to the nature of secured loans, an applicant's credit history has less of a bearing on things than it would if an unsecured personal loan was being applied for. However, it's important to note that one's past credit history does still play a role.

Nine times out 10 an applicant with a fairly good credit rating will get a better deal, usually in the form of lower interest rate than a lower credit applicant would. The following is a guide to what can be expected in terms of poor to excellent credit rating.

Poor Credit History

Individuals, who in the past may have defaulted on loans, have outstanding arrears or CCJs will usually not find it too difficult to get approved for a secured loan. They may however, find themselves paying a slightly higher interest rate. In most cases this does not exceed 15% and the average is around 10%. Some lenders may be willing to go as low as 7% though.

Fair Credit History

Individuals within this category will often find that they will have to pay around 7% interest, sometimes though rates of 10% may be applied. When compared to unsecured loan rates, which average about 15%, the secured loan route is generally much more appealing.

Excellent to Good Credit History

Individuals who have never defaulted on past loans and have always repaid on time are likely to find themselves within this group. With an excellent/good credit history come the best secured loan offers. Expect to pay around 6 to 7% interest, with rates rarely lower than 6%.

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