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What Percentage of My Income Can I Borrow on a Secured Loan?

A secured homeowner loan is not simply based on your level of income.

Secured homeowner loans work in a slightly different way to a traditional mortgage. Whereas a mortgage lender may agree a multiple of your gross salary – three to four times your earnings is common – a secured loan is underwritten on a different basis. It is not simply a case of a lender agreeing a loan based solely on your earnings.

The maximum borrowing on a secured loan is typically based upon an ‘affordability calculation’, the equity in your home and your credit rating. Affordability calculations take into account your net income and all your outgoings. They look at what disposable income you have left after you have paid all your monthly outgoings, and a lender can carefully determine your ability to repay your secured homeowner loan from these figures.

This is also true if you are self-employed. A secured homeowner company will take into account all your income and outgoings before making a decision. Using affordability based criteria and not simply a percentage of or multiple of your income often means you can borrow more than you may think.

Secured homeowner loans are also based on the equity that you have available in your property. Generally speaking, the more equity you have in your home, the higher then loan you can borrow (depending on the affordability calculation and your credit history).

Whilst there are plenty of secured homeowner loan providers out there who will agree a loan for you if you have less than perfect credit, it is generally true that your interest rate and the amount you can borrow will be better if you have a good credit rating.

So, don’t automatically assume you won’t be able to take out a secured homeowner loan based on your income. These loans are generally agreed on an affordability basis and they take issues such as the amount of equity you have and your credit history into account. Because of this, you may be able to borrow more than you anticipate.

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