FAQs and tips on responsible borrowing

What exactly is a homeowner loan?
It's a loan that is secured against your property, giving you a higher borrowing potential than you might be able to find with an unsecured personal loan. A homeowner loan is good news if you'd like to consolidate your debts or fund a major project as you could reduce your monthly outgoings and get your plans off the ground. You can also spread the repayments out over a longer period of time – anything from 5 to 25 years in fact – so your monthly repayments are affordable, although the overall interest payment will increase.

What happens if I make an early repayment?
If you settle your loan early, an early repayment charge will apply during the loan period. A rebate of charges will be calculated in accordance with a formula laid down by consumer credit regulations. This calculation provides some compensation to us, by way of interest, for your loan being repaid early.

Will the APR change while I'm paying off the loan?
The interest rate is variable. This means that, like most mortgages, your rate could go up or down. It's charged on the outstanding balance calculated daily from the date the loan is drawn until repaid in full, debited monthly in arrears.

What credit rating do I need for secured loan?
We consider each case individually, so even if you’ve had credit problems, we may still be able to help. Like most other lenders, we use your credit rating amongst other things to assess the risk of offering you credit.

Your credit rating is calculated on the information in your credit report. Most lenders will decide whether or not to give you credit based on information supplied by credit reference agencies such as Experian, Equifax or Callcredit.

These credit reference agencies compile credit histories from a variety of different sources. These include the electoral register, County Court Judgements and how effectively past debts have been paid.

Data held by the credit reference agencies include:

• The Electoral Register
• County Court Judgements
• Bankruptcy and administration orders
• Credit payment history
• House repossessions

If you’d like to check your credit report, you can get a copy from one of several agencies online such as Experian, Equifax, or Callcredit.

Tips on borrowing

Be realistic for trouble-free borrowing
Most people need to borrow at some point, but how do you do it wisely?

Your options
Secured borrowing, including mortgages, is generally cheaper over the longer term but is normally secured with your home. However, you'll need to extend your borrowing term to achieve lower monthly repayments and overall you'll pay back a greater amount. Also, if you default, you can lose the roof over your head. It's easier than ever to withdraw equity from your property if it's increased in value. But, again, if you're using a secured loan to pay off several unsecured loans, your home is at risk if you do not keep up repayments.

Unsecured personal loans, overdrafts and credit cards are available if you don't own your home or don't want to secure a loan on your property:

• Personal loans: Usually repayable in monthly instalments by Direct Debit/Standing Order over a fixed period. They are popular for loans of between £1,000 and £15,000 but you could borrow less, or more, depending on the lender.
• Overdrafts: Easy and flexible. An authorised overdraft can be good value but straying beyond the agreed limit will mean fees and higher interest charges.
• Credit cards: Another flexible way of borrowing. Apart from a minimum monthly balance payment, borrowing on cards allows you to pay off the debt in your own time. You can make lump sum repayments too if you have cash spare. Generally higher interest rates than loans could mean poor value for longer-term borrowing.

What are you borrowing for?
Whether it's for a new pair of shoes, school fees or an extension to your home, be clear about why you need the money then choose the most appropriate way to borrow.

Credit cards are handy for shopping but are an expensive way to fund bigger or long-term financial needs, such as a home extension, when compared to using some of the equity in your property.

What can you afford?
Deduct your total monthly outgoings from your income to find out how much disposable income you have. Be realistic. If you have £280 left over at the end of the month, don't commit the whole lot to loan repayments or you could end up paying a restaurant bill from your jar of pennies.

Interest rates and charges
At the simplest level the APR (Annual Percentage Rate) relates to the total charge for credit - the amount of interest you pay and most other charges such as arrangement fees and annual fees - and when and how often these must be paid.

How long to repay?
Aim to repay the loan as quickly as possible (although watch out for early repayment charges). Lenders often charge lower interest rates if you borrow larger amounts or pay back over a longer period. But the longer the term, the more interest you will have to repay and the bigger the burden if you should lose your job.

What about Payment Protection Insurance?
Payment Protection Insurance can help in case of accident, sickness or unemployment as your repayments should be covered.

If you get turned down?
Credit reference agency applicant searches leave a 'footprint' on your credit rating that can affect future borrowing requests so don't press on if you're having no luck. Instead, think about why you're being turned down and perhaps borrow less.

If you change your mind?
Use any 'cooling off' period included in your credit or loan agreement. Before you put pen to paper, ensure you're confident with the deal and that you can pay back your debt.

Debt - be careful !
Don't let desperation be your motivation for borrowing more - it will only lead to bigger problems. Rolling several expensive debts into one cheaper loan to reduce your outgoings can be a good idea but borrowing more just to pay debts is not.

If you get into trouble, get help!

Important information
Please read our site terms and conditions. In addition we would advise you that:

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.