Do I need to be a homeowner?

You don't need to be a homeowner, we accept applications from tenants.

This question comes up a fair bit from our customers which may appear slightly odd to some given we offer unsecured online loans. However, we do know that some lenders do ask, on the face of it some pretty strange questions. Many lenders who offer secured loans will have to ask this question if they wish to secure the loan against an asset of the borrower. Typically, this asset is the borrower's property and often these types of loans are known as homeowner loans, secured seconds or second mortgages.

What is a secured loan?

A secured loan is money you borrow that is secured against an asset you own, usually your home. The interest rates tend to be cheaper than with unsecured loans, but it can be a much riskier option so it's important to understand how secured loans work and what could happen if you can't make the payments.

What happens if I miss payments on a secured loan?

The loan is secured on your home, so you could lose your home if you cannot keep up your repayments.

Borrowing against your house

Is my home at risk if I don't pay my payday loan back?

In a word, no. We do not require any security to be given that we could have recourse to if there was an issue. This an important point to make as there does seem to be confusion around unsecured loans and potential legal action through the courts. On a general level a lender may have the right under the correct and appropriate circumstances to pursue non-payment through the courts depending on what they have stated in their loan agreement with the borrower. However, this may or may not be part of their standard collections procedure.

Examples of security used by lenders:

  • Property
  • Cars, vans and motorbikes
  • Your salary
  • Future income

What is the court process?

The process below relates more to unsecured loans than secured loans. Before filing with a court, a lender will send you some form of notice as a warning along with a default notice. The warning will let you know that they intend to proceed to court should you not be able to reach a mutually satisfactory agreement on how to pay the remaining outstanding balance on your account. If that doesn't resolve the matter then the lender will file their claim with the court who will write out to you with the claim and what is known as a response pack.

The claim form will provide details of how much your lender is claiming you owe them as well as details of their contractual rights to pursue the claim. The response pack consists a number of forms. These forms vary, for example some of the forms are for you to tell the court that you accept you owe the money. However, if you don't think you do owe the money then there is a form to tell them that. Also contained in the pack is a form to say you acknowledge that you have been served notice and that you have received the claim form and response pack.

Will it improve my chances of being approved if I am a homeowner?

Not necessarily. Every unsecured lender has a different lending criteria. For obvious reasons it is hard to guess what each lender will have in their policy but what is most common is how you have conducted your credit commitments in the past. So, whether or not you are a homeowner, missed payments in the recent past, be that a utility bill or a credit card, will probably have more of an affect.

What is an interesting discussion is whether rent should be counted as a "credit" commitment especially as a renter often pays rent upfront i.e. for the month ahead. Although not technically credit, it is a regular payment, requires budgeting discipline and shows all the hallmarks of servicing a debt as it were. Our opinion is that where possible and appropriate rent should indeed be reported by landlord to a Credit Reference Agency and therefore be considered by credit providers. In practice however, it is hard to see all landlords signing up to providing accurate data on a monthly basis. Further questions are raised in terms of incorrect or inaccurate data as that could be potentially harmful to an individual's credit report. Perhaps, some professional landlords, for example a housing association would be a good starting point however that is a very limited section of the UK renting population.

This may be a good place for a prospective borrower to make this case and to show, with their bank statements, their rent going out in full and on time month after month. Or perhaps get a letter from their landlord stating they are on time and up to date.