Paul Crewe is a director at Smart Money Loans

When we think about a loan, particularly a secured loan, the tendency is to put it in a different box from that other secured loan, namely the residential mortgage.

I have always found it ironic that the definition is exactly the same, as they are both just loans secured against property, and yet secured loans still struggle for the recognition they deserve.

OK, the mortgage is a long term contract whereas the secured loan has a shorter shelf life and yes, before I start getting letters, they are still regulated differently.

My point is that at the heart of the secured loan debate, a residential mortgage and secured loan are really brothers under the skin.

I am often asked where secured loans fit in to the portfolios of busy intermediaries and my answer is quite simple.

If your client wants to raise capital for almost any purpose the secured loan provides the ideal facility to achieve that exact aim. I think the main issue for advisers comes with thinking outside the conventional remortgage box.

The remortgage route was considered a ‘safe bet’ particularly when money was plentiful and also attractive on face value, by subsuming the extra borrowing into the larger mortgage. By spreading the cost of the extra borrowing over a long term, it made it seem that monthly repayments were not greatly inflated.

However, just how appropriate is that kind of advice today? Remortgaging might still look attractive, but the costs involved, time to completion, client credit profile and the hidden interest costs of stretching borrowing over a mortgage term are factors, which every intermediary needs to take into account.

If we add in the withdrawal of interest only and the tightened criteria many high street lenders have adopted, it is clear that the case for secured loans is a strong one.

Secured loans can be repaid early (one month’s interest) carry no upfront charges such as legal, lender arrangement fees or valuation fees and with rates starting at less than 6%, they make a strong case for inclusion in any adviser’s summary of alternative funding solutions.

Perhaps the biggest advantage they have is that they can sit behind the existing first charge mortgage and therefore there is no need to uproot the client from what could be a very good existing mortgage deal, which cannot be replicated by remortgaging.

Secured loans might be the ‘little brother’ but like many family relationships they can no longer be ignored.