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Do you expect to see less or more second charge mortgage lenders in 2018?

Shaking off second charge loan misconceptions

James Briggs

I recently received a call from a broker asking for some advice about a prime customer who was presenting a case that seemed ideal for a second charge loan.

The broker told me they would never normally consider a second charge loan and wanted to know whether they should recommend one as the customer didn’t have adverse credit.

My heart sank a little when I realised that we’ve still got work to do to convince brokers and their customers that second charge loans are a valid alternative to remortgaging. We also need to dispel some of the misconceptions that still exist in the marketplace.

There are a couple of misunderstandings that particularly concern me. We all need to work together to shake them off once and for all.

The first misconception is the belief that second charge loans are only for customers with adverse credit. While it’s true that they’re used by customers with less than perfect credit profiles, the vast majority of them are taken on by people who are prime borrowers who need to raise funds quickly, want to protect an existing first charge rate or want to avoid the early repayment charges that a remortgage could incur.

The second one is that customers will proactively ask for a second charge loan. Although they are recognised within the industry as an alternative finance solution, they’re not so well known by the general public. Brokers can play a vital role in bringing them to the attention of customers who are looking to capital raise. Customers will rarely ask for a second charge loan outright; they will probably describe a scenario. This is where a knowledgeable broker really comes into their own: identifying opportunities when a second charge loan could be the solution.

Although the perception of second charge loans has changed in recent years, we all need to pull together to ensure the market continues to evolve and grow. It’s in everyone’s interests to raise awareness of the product. Brokers will have an increased range of products at their disposal to secure repeat business and referrals, and customers will be able to access a flexible product which could offer a solution for a wide range of situations.

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