Before the current credit crunch many secured loan lenders were prepared to grant secured loans of up to 90% LTV for self employed applicants. These homeowner loans were even available to the self employed with only a self declaration of income.This meant that the self employed could write declaring their own earnings on a billhead or simply on a sheet of paper accompanied with a business card. This is virtually no proof of income at all, as both businees cards and billheads can be produced at home from a pretty basic computer. Or for a few pounds you can obtain business cards from machines found in thousands of motorway service areas and shopping arcades throughout the whole of the UK.
When the credit crunch arrived self declaration of income ceased, and secured loan lenders who were still willing to do self employed business, started to demand an accountant’s certificate or often full accounts. The LTV for the self employed was also restricted to 65% LTV. This meant that 35% had to be deducted from the mortgage balance, and the difference between that figure and the outstanding mortgage balance was the maximum that could be borrowed as a secured loan. This meant that if a property was worth £200,000 and the outstanding mortgage balance was £140,000 there was no equity whatsoever to be granted a secured loan. This was really unfair to a homeowner who did not have a great deal of equity on their property, and was very biased against those who own their own business, and after all the small business is the backbone of our society.
The good news just announced by Blackhorse is that they are now prepared to grant secured loans to the self employed at 80% LTV. This means that based on the previous example a self employed applicant would be eligible to apply for a secured loan of up to a maximum of £20,000 Good news you might think, and in deed good news it is. Hopefully the Blackhorse announcement heralds the start of a relaxing of some of the strict lending criteria , and offers a glimmer of hope to the loan industry which has been trapped in a long dark tunnel for what seems like an eternity.
After the cheering news from Blackhorse, low and behold what happens? The Royal Bank Of Scotland announces that they are withdrawing their unsecured loan product from the broker market. Therefore the poor struggling loan and secured loan broker is handed a little hope with one hand only to almost immediately have the hope snatched away with the other hand.This RBS loan product was an appealing unsecured loan with the excellent interest rate of about 7% APR. It was fairly strict in its underwriting criteria as regards to status and income, but nevertheless it was a useful niche product. With it’s withdrawal, loan and secured loan brokers no longer have a clue what to think about whether their situation is about to improve or otherwise due to the totally opposite signals put out by two major players in the loan industry, both secured and unsecured.