Is Second Charge Lending coming back into Vogue? – Selina Finance
Second Charge lending has developed a pretty bad image over the past 10 years, but the public’s perception might be changing
To say that second charge lending has had a tough time of it in recent years would be one hell of an understatement. We all remember the financial crisis in 2008 and the unfortunate panic that ensued in the UK especially for customers of Northern Rock. Second charge lending was in the eye of the storm with both mis-representing and mis-selling being prominent. This, coupled with self certified false income reporting and banks lending to extremely risky LTV (Loan to Value) levels meant that consumer confidence in the second charge loans market was shattered.
Eleven years on and with lessons learned on stricter affordability criteria and LTV guardrails protecting consumers’, the market is recovering. The latest figures from the Finance and Leasing Association, the UK’s leading trade body for firms providing asset finance, show that 21,288 people took out a second charge over the 12 months to the end of November last year. This was a 9 per cent rise on the previous year.
Second charge lending is developing a new image
Second charge lending still has an image problem in many ways, being synonymous with equity release in the consumer space, enabling the grey pound to fund cruises around the Caribbean. However, this doesn’t paint the full picture. Look carefully at the uplift in sales and you’ll see there’s a growing portion of business customers that are choosing secured lending to fund their business growth.
So why is this growth taking place? For many businesses, secured lending, specifically on a second charge basis, is actually a better source of finance than alternative options. Interest rates as low as 5.95% per year provide an incentive for entrepreneurs to invest, while the ability to use this second charge loan as a line of credit provides the flexibility that many businesses crave.
Unsecured loans has become a competitive market in recent years
In comparison to the second charge lending over the past 10 years, the unsecured business loans market has exploded. You would have to be living under a rock not to have seen Funding Circle plastered all over TV or Iwoca on the London underground.
New technology has meant that these digital lenders are able to offer unsecured business loans at a much faster rate to traditional banks and a vastly improved customer experience all while reducing costs by as much as 40%.
New lenders are now entering the secured market
The previous barrier to second charge loans has always been the mountains of paperwork, slow processing times, huge early repayment charges and rigid loan agreements, but even this is changing.
Innovative new lenders like Selina Finance are finally entering the space, offering low interest rates, digital processes, turnaround times to challenge their unsecured rivals and even flexible agreements without fees. Exciting times ahead
Find out more about Second Charge Lending at www.selinafinance.co.uk