Customer FAQs - your questions answered
Taking out a loan is a big decision that requires a lot of thought and consideration. It's worth evaluating the risks, and finding out what your options are before going ahead.
We hope we've answered your questions below but if you have anything further to ask, please get in touch:
0800 980 6273
enquiries@centraltrust.co.uk
Homeowner Loans FAQs
Is a homeowner loan the same as a secured loan?
Homeowner loans are frequently referred to as secured loans because you must be a homeowner to use your house as collateral.
Whilst all homeowner loans are secured loans, not all secured loans are homeowner loans. It depends on the asset used as collateral. Almost anything of significant value can be used as collateral to secure a loan. Common assets include residential or commercial real estate, vehicles, cash savings, and investment portfolios.
All secured loans give the lender similar rights to repossess your home if you don't keep up repayments.
How does a homeowner loan work?
A homeowner loan uses your home as security against the amount of money you borrow (known as providing ‘collateral’).
Using a property as security usually lets you borrow money at a lower interest rate, and to borrow larger amounts of money. Your property must have enough equity to cover the value of your loan – it is important to remember that the property may be at risk if you do not keep up with any repayments secured against it.
Using your property as security may also help you get a loan, even if you don’t have a great credit rating. If you would like to check your credit rating, you can carry out a free, online credit check here.
What are the risks associated with a homeowner loan?
No loan is 100% safe, as failure to repay will result in a poor credit history. Borrowing against your home can be risky, but only if you don't pay back the money. A homeowner loan can be good if you wish to borrow larger amounts, get a better interest rate or overcome a poor credit history, but it's essential to make sure that you can afford the repayments as your home may be at risk of repossession if you can’t.
What is a secured loan?
A secured loan is a means of borrowing money that is backed by something you own, like a property or car. If you don't pay back the loan on time, then the lender can take the item used as security in lieu of the loan.
The principle behind a secured loan is that lenders want to make sure that people are going to repay the loan on time, so by offering collateral against a loan, a lender will have more confidence in the borrower.
Secured loan vs remortgage - which is better?
Getting a secured loan over remortgaging may be considered a better decision under these circumstances:
- If your financial situation has changed
- If you need funds quickly
- If you’re facing ERCs (early repayment charges) for remortgaging
- If your credit score has declined
- If your mortgage lender won’t allow additional borrowing
- If you have a preferential rate on your first charge mortgage
You can find out more on this topic from our 'What is the difference between secured loans and remortgaging?' blogpost article.
How does a secured loan with bad credit work?
A secured loan uses your home as security against the amount of money you borrow (known as providing ‘collateral’).
Using a property as security usually lets you borrow money at a lower interest rate, and to borrow larger amounts of money. Your property must have enough equity to cover the value of your loan – it is important to remember that the property may be at risk if you do not keep up with any repayments secured against it.
Using your property as security may also help you get a loan, even if you don’t have a great credit rating. If you would like to check your credit rating, you can carry out a free, online credit check here.
Mortgage vs secured loan – which is better for me?
The right option depends on your circumstances. A first charge mortgage replaces any existing mortgage on your property or can be taken out against an unencumbered property. A secured loan (also known as a second charge mortgage) allows you to borrow against your home's equity without replacing your current mortgage. If you're looking to remortgage or raise capital, we'll assess your circumstances to help determine which option best suits your needs.
Is a homeowner loan the same as a mortgage?
No. A homeowner loan is different to a mortgage. A homeowner loan is taken out in addition to your mortgage, but your mortgage takes priority over a homeowner loan. This means that if your house is repossessed to pay off a debt, the mortgage lender will be paid first. Then the lender who provided the homeowner loan will get what they are owed. If any money is left over, you will get it.
Can I use a home improvement loan for any renovation?
Generally, yes. Funds from a home improvement loan can be used for various renovations, from minor updates to significant overhauls. However, always check the loan's terms to ensure your project is covered.
How do I qualify for a home improvement loan?
Qualification criteria vary, but lenders typically consider your credit score, income, the value of your property, and the amount of equity you have.
Can I take out a secured loan with bad credit in the UK?
Secured loans make it easier for people with lower credit scores to borrow money. Loan providers are more likely to lend money to someone with bad credit if they put up a security, since they will have something in return if you don't pay them back.
If you have bad credit you may have to pay a higher interest rate, but this will depend on your situation. If you do have credit issues, you should always think whether getting into more debt is the best thing to do.
Always start by making certain you can afford your monthly repayments. If you don’t make your payments regularly and on time, you risk damaging your credit score and losing your home. Setting up a direct debit can be the best option for many people and always make sure that you stick to your budget and do not overspend.
Can I pay off a secured loan early?
Yes. If you find yourself in a position to repay your loan early, you will be able to do so. Some companies may charge you an early repayment fee for doing so, but some lenders won’t. Even though you may be required to pay a fee, you might still repay less money in total, as you will no longer be paying extra interest.
Mortgages FAQs
Why take out a first charge mortgage?
First charge mortgages are most typically used for buying a home.
Because the lender has priority over the property, first charge mortgages generally offer lower interest rates compared to other forms of borrowing, such as personal loans or credit cards.
The mortgage is secured against the value of the property, reducing the lender’s risk. This can mean more affordable monthly payments and lower overall interest costs throughout the life of the mortgage.
First charge mortgages can be easier to obtain for borrowers with a strong credit history and reliable income. These mortgages allow buyers to spread the cost of purchasing a home over a longer period, helping to make home ownership more manageable and accessible.
Why take out a second charge mortgage?
Using your home as security could help you borrow more money, get a lower interest rate, or even overcome a poor or bad credit history.
Second charge mortgages are a useful source of borrowing for many people, as they can be used for a variety of different purposes.
They can be used to fund home improvement projects, whether these are essential property repairs or bigger projects with the aim to enhance a property or to increase the property value.
Some people take out second mortgages to help consolidate their debts. It could be that someone has multiple debts that they have accumulated over a longer period of time, and they intend to combine them into one loan with a lower repayment cost. In doing so, it can help people understand their debt better as it helps simplify their monthly payments.
Or they can simply be used to raise funds for other purposes that an individual does not have the savings to cover at the time.
What are the differences between a first charge and second charge mortgage?
A first charge residential mortgage is typically used to purchase a property. In contrast, a second charge mortgage is an additional loan secured against the same property. In both cases, the property serves as collateral, meaning it can be used to recover the debt if the borrower fails to maintain repayments.
A second charge mortgage is another name for a loan secured against the equity in your property. These mortgages are taken out in addition to your first mortgage, hence “second charge”.
Mortgage vs secured loan – which is better for me?
The right option depends on your circumstances. A first charge mortgage replaces any existing mortgage on your property or can be taken out against an unencumbered property. A secured loan (also known as a second charge mortgage) allows you to borrow against your home's equity without replacing your current mortgage. If you're looking to remortgage or raise capital, we'll assess your circumstances to help determine which option best suits your needs.
Is a secured loan the same as a mortgage?
No. A secured loan is not a mortgage. It's a separate loan taken out in addition to your existing mortgage, secured against the same property. Your mortgage always takes priority: if your home were repossessed, the mortgage lender is repaid first, then the secured loan lender, with any remaining funds returned to you.
Secured loan vs remortgage - which is better?
Getting a secured loan over remortgaging may be considered a better decision under these circumstances:
- If your financial situation has changed
- If you need funds quickly
- If you’re facing ERCs (early repayment charges) for remortgaging
- If your credit score has declined
- If your mortgage lender won’t allow additional borrowing
- If you have a preferential rate on your first charge mortgage
You can find out more on this topic from our 'What is the difference between secured loans and remortgaging?' blogpost article.
Are bridging loans more expensive than standard mortgages?
Yes. Bridging loans are designed to be short-term solutions, typically lasting up to 12 months. so they usually have higher monthly interest rates than traditional mortgages.
However, they are designed for speed and flexibility, not long-term borrowing.
What do I need to pay off my mortgage early?
Paying off your mortgage early with us is very simple. All you need to do is call us on 0800 980 6274 to request a final settlement figure. This is simply the amount of your current mortgage balance plus any interest that's due up to the date of settlement, plus any early repayment charge or exit fee that's due. These can vary depending on your mortgage product's terms and conditions.
Can I settle my mortgage online?
Please note that we cannot accept payments for this through our online payment system. If you'd like to settle your mortgage early, please contact a member of our team on 0800 980 6274 to obtain a settlement figure.
Am I eligible for a buy to let mortgage?
To be eligible for a buy-to-let mortgage, you must typically be aged 18 or over, and the mortgage term must usually end by around your 80th birthday (depending on the lender). You must also own a rental property that can be used as security in case you fail to make repayments.
What's the difference between Consumer Buy to Let and Family Buy to Let?
A Consumer Buy to Let mortgage is intended for accidental landlords. These are people who didn't originally buy a property as an investment but now need to rent it out due to a change in circumstances. This could include inheriting a property, moving home but keeping your existing property, or relocating for work.
A Family Buy to Let mortgage is designed for people who want to buy or remortgage a property to rent to a close family member. Unlike a standard buy to let mortgage, this type of lending recognises the different risks and regulations involved when renting to relatives.
Both products are subject to eligibility and lending criteria. If you're unsure which option is right for you, our team can help you find the most suitable solution for your circumstances.
Can I get an unencumbered mortgage if I own my home outright?
Yes. If you own your property outright, you may be able to take out a mortgage secured against it, subject to eligibility.