One of the Casualties of the UK Credit Crunch - 125% Secured Loans

If you have been in the market for a secured loan, and have been wondering why companies no longer seem to be offering 125% secured loans, look no further than the credit crunch which is currently sweeping the globe and hitting the United Kingdom particularly hard.

We can't speak for all companies (I am sure that some secured loan firms still offer 125% secured loans on a case by case basis), but most companies no longer offer these types of loans. The maximum LTV (Loan to Value) currently offered by most lending firms is 100% - some are even going as low as 80-90%. This isn't be done to irritate customers - this is simply a safeguard that banks and lenders are undertaking in order to minimize their risk. In this current lending environment, most banks are seeking to tighten their lending criteria.

What exactly do "100% LTV" and "125% Secured loans" mean?

As stated, "LTV" refers to "Loan to Value". This is a ratio that pits the total amount of any potential and outstanding loans versus the total value of the property. A "100% LTV" loan means that your current outstanding mortgages and secured loans, plus the loan that you are wishing to take out against the property, can not exceed the total value of your property.

Let's take an example:

You currently own a property in the United Kingdom which was recently appraised at 300k pounds. You have a 100k mortgage outstanding on the property through your bank, and an additional 30k secured loan outstanding on the property from your favorite secured loan firm. This means that you currently have 170k in total equity in your home (300k - 130k). Based on the 100% LTV formula, this means that you would have 170k in total borrowing power remaining on the home. This doesn't mean that you would have to borrow up to this amount - this is simply represents your total borrowing power.

When the markets start to improve, you will likely see the return of the 125% secured loan. Until then though, you should realize that most lenders will not offer this product.



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