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Why use secured lending rather than an equity injection?

Date 2nd June 2016 //
Author Ben Shaw, Managing Director HNW Lending
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In a word, cost. Secured lending is cheaper than equity funding. This is because secured lending means that the lender has 'security' in other words, if you do not repay the loan, they have something tangible that can be sold in order to repay the loan. This makes the lending less risky and so the rate charged by the lender will be less.

HNW Lending Ltd is one of the providers on the platform that offers this type of lending - for amounts from £30k to £5m. And the security? Well they are actually very flexible. The most common security is property. This ranges from a second loan on the house you live in (so your current mortgage stays in place), to loans on buy to lets, loans on holiday homes, to the more unusual such as loans on classic and super cars, antiques, timeshares, fine wine. They are also able to put in a short term loan whilst pension-led funding solutions are put in place, by using the pension pot as collateral.

Loan lengths can be anything from a few months to a few years and interest rates tend to start at around 8% for a first charge loan (so any existing mortgage is replaced) to around 12-15% pa for a second charge loan (where there is a mortgage in place) and the more unusual assets.

These loans can generally be put in place very quickly if required - about a week if necessary, and also potentially allow for some money to be taken on day 1, with more drawn down later. Interest can also be rolled-up (so paid at the end of the loan) if required.

It’s certainly an option to consider if you have an asset that could be used as security as it will tend to be cheaper than many other forms of business finance.

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