How To Find Reputable Secured Loan Companies?

Secured Loans lending is considered a high-risk credit activity as borrowers risk the repossession of their properties if they fault in their payments. Potential borrowers should therefore make sure that secured loan lenders hold the appropriated Consumer Credit Act 1974 license issued by the Office of Fair Trading (OFT) and that the secured loan lenders comply with OFT's latest standard for second charge lending for lenders and brokers.

Licensed Secured Loan Lenders

Customers can check online whether secured loan lenders hold a license or not by searching on OFT's Consumer Credit Act (CCA) Public Register at http://www2.crw.gov.uk/pr/Default.aspx. The register allows searches based on license number, company registration number, and organisation or trading name etc.

Second Charge Lending Standards

The OFT has published a guidance on second charge lending or secured loans where certain consumer credit standards are expected from lenders. Potential borrowers should ensure that the business they are seeking to borrow money from do comply with the recommendations and fair trading practice highlighted in the guidance. The standard covers issues such as:

• Advertising. Secured Loan Lenders should not suggest that loans are available regardless of the income or financial circumstances of the borrower or that they will depend only on the borrower's property value.
  
  
• Understanding of risk and obligations. Secured Loan lenders should highlight the risks to the borrowers if they miss payments, including arrears charges, repossession of the property and borrower's credit record in the future. Risk and obligations need be explained in a clear, plain language and lenders must ensure that borrowers understand all the implications before proceeding with contractual agreements.
  
  
• Transparency about rates and fees. Secured Loan lenders need to clearly state in which circumstances rates or charges may change, any commissions that brokers may take, default charges and what early repayment charges may apply if any.
  
  
• No high pressure selling. Borrowers should be given enough time to understand the conditions of the agreement according to the CCA, with no pressure or incentives for a quick agreement.
  
  
• Clear Contract. The contract should clearly explain the nature of the agreement as well fees, charges and any conditions that may apply as result of default payments.
  
  
• Pro-active Plan for customers in arrears. Secured Loan Lenders should offer a pro-active plan for customer in arrears, engaging them to address the problem and notify them on regular but not excessive periods as stated in the CCA.
  
  
• Options before repossession. Reposition should be the last option that a secured loan lender should opt. Threats of court proceedings, unreasonable demands of one large arrear payments or in short time should not be used.