Homeownersin the UK have a great advantage over others, as they can easily getloans and that too on a reasonable rate of interest with addedadvantages like flexible repayment options. Homeowners need not huntfor loans like tenants and other non-homeowners. Lenders in the UKloan market prefer granting loans to those who can pledge their homeas security, as personal insolvencies in UK are increasing at analarming rate, and lenders don't want to take chances by offeringunsecured loans.
Securedloans are availed by borrowers who need hefty amounts at lowinterest rates. These loans are beneficial for the lender as well asthe borrower. Secured loans are granted on the basis of thefollowing:
HomeEquity- It is the market value of the house minusall the debts incurred against the home. This may include the firstcharge on the loan. The amount given by the lender as securedloans is directly proportional to the home equity. So, homeequity is the most important factor for the lender. Nowadays, thelenders also give up to 125% of the equity value if the borrower hasa good credit score or DTI ratio.
CreditScore- It can be defined as the score ranging from300 to 900 which reflects the credit worthiness of a borrower, and isprimarily determined by timeliness of past loan payments. Anythingabove 700 is a good credit score, with which a borrower has a goodchance of acquiring a loan. However, in case of securedloans, if the home equity value is good enough,lenders sometimes may ignore a bad credit score.
Disposableincome-This reflects the paying capacity of theborrower and is judged by the DTI i.e., Debt to income ratio. DTI iscalculated by dividing the incomes of the borrower by hisexpenditures and if it comes out to be greater than 3.6, there aregood chances for the borrower to avail a loan comfortably. The lenderdoesn't usually ignore DTI because a borrower may have equity in hishouse; but, to repay the loan, his income should be greater than hisexpenses.
So,lenders granting keep in mind theabove stated factors.
