The decision of the borrower to grant you secured loans depend on the following:
- The home equity i.e. the value of the property pledged
- Creditworthiness of the borrower i.e. his ability to repay
- The personal circumstances of the borrower
- The annual income of the household to find the affordability
- Other loans and mortgages (if any) against the house
Secured loans are granted on the basis of the home equity. Equity basically refers to the ownership. To define, it is the market value of your house minus all the debts taken against the home. The debts may be the first, second charges (mortgages) or other secured loans. For instance, if the market value of your house is £35,000 and the outstanding debts incurred by pledging it amount to £13,000, the equity of the house comes out to be £22,000 (£35,000-£13,000). This is the eligibility of the borrower. However, inmost cases, the lenders grant 90% of the home equity keeping in mind unforeseen events like depreciation due to loss by fire, fall in house prices, etc. So, in the above stated case, the amount that a lender may grant comes out to be £19,800.