Can I get a secured loan with defaults?

Yes, you can get a secured loan if you have defaults.

Secured loans require collateral to secure the loan (usually your property), and the presence of defaults on your credit history may impact your ability to qualify. It may just be more challenging as some lenders may not be able to help.

It's important to note that lenders vary in their eligibility criteria, and some may be more flexible than others. If you have been turned down by lenders in the past, it doesn’t mean you cannot get a secured loan. You may need to speak to a specialist lender like us who has experience helping people with poor credit profiles.

What are defaults?

Defaults occur as a result of a failure to fulfil a financial obligation, such as not repaying a loan or not meeting the terms of a credit agreement. When you default on a loan, it means you have not made the required payments according to the agreed-upon schedule. Defaults can occur with various types of loans, including personal loans, credit cards, mortgages, and other financial agreements.

Defaulting on a loan can have significant consequences, including:

• Negative impact on credit score: Defaults are reported to credit bureaus and can have a substantial negative impact on your credit score. A lower credit score can make it more challenging to qualify for future loans or credit cards.
• Late fees and penalties: Lenders often charge late fees or penalties for missed payments. These additional charges can increase the overall amount you owe.
• Legal action: In some cases, lenders may take legal action to recover the amount owed. This could result in a court judgement against you, leading to an attachment of earnings or other legal consequences.
• Repossession: For secured loans, defaulting can lead to repossession of the vehicle or the property used as collateral.

How long does a default last on your credit profile?

The duration for which a default remains on your credit profile is six years. This time starts from the date of the default, not from when you first missed a payment. After the six-year period, the default should be automatically removed from your credit report. This will have an impact on your credit score and may affect your ability to obtain credit in the future.

Getting a secured loan with defaults

Using your property as security lowers the risk for lenders, which means they could be more relaxed about who they want to lend money to. You will have more of a chance of getting a secured loan with defaults rather than an unsecured loan. This is because unsecured loan lenders do not require you to use any security. Instead, they look at your creditworthiness. 

Here are some steps you can take to improve your chances of getting a secured loan with defaults:

• Equity: Ensure that the property you are securing the loan against has sufficient value to cover the loan amount. When you enquire about a secured loan, the lender will look at how much equity you have in the property you intend to use as security. Essentially this is the difference between the value of your property and how much you still owe on your mortgage.
• Explain your defaults: Be prepared to provide an explanation for the defaults on your credit history. Lenders just want to understand what happened, and get a clearer idea of your finances. If there were extenuating circumstances, such as a temporary financial setback, medical issues, or job loss, explaining these factors may help.
• Show improvements: If you've taken steps to improve your financial situation since the defaults occurred, such as paying off other debts or establishing a stable income, highlight these improvements. This may strengthen your application and lenders may be able to help if they see positive changes.

Talking about your finances can be difficult. We understand that life happens and there’s more to your story than your credit score or your recent pay slip. This is why we look at the bigger picture. If you have defaults or complex income streams, it may not stop you from borrowing with us.

What happens when you pay the default?

When you pay off a default on your credit report, it means you are settling the outstanding debt that led to the default. Once you make the payment, the lender or collection agency is expected to update the status of the default on your credit report. The default status should change to "satisfied" or "settled." However, the default will still remain on your credit report for the specified period, usually six years, from the date of the default.

Paying off a default can have a positive impact on your credit score, although the improvement may be gradual. While the default will still be visible on your credit report for some time, having a "satisfied" or "settled" status indicates that you've addressed the outstanding debt.

It’s important to regularly monitor your credit report so you can track changes and ensure that information is accurate and up to date.

Summary

It's important to communicate with your lenders if you're facing financial difficulties and are unable to make your payments. Some lenders may be willing to work with you to find a solution, such as modifying the terms of the loan or establishing a repayment plan. Ignoring the issue and allowing defaults to accumulate can worsen your financial situation and make it harder to recover in the long run.

If you have defaults, you may need a specialist lender to help. This is where we come in. We are a specialist secured loan lender and have been helping borrowers with defaults for over 35 years. Our aim is to find an affordable loan, suited to your needs. If we can’t achieve that, we will tell you. We’ll never encourage you to put yourself in financial harm’s way.

You can enquire by submitting an enquiry below, calling us on 0800 032 3737 or starting a live chat with a member of the team.

If you are thinking of consolidating existing borrowing you should be aware that if you are extending the term of the debt you may be increasing the total amount you repay. All loans are subject to status, and appropriate lending terms.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.