Self Certification for a loan is essentially the method whereby a client self declares their income. This may occur when a client is self employed, or is employed but also has an income derived from work outside of their normal employment. Many lenders, especially in the current market, are somewhat weary of this type of income. Issues regarding affordability have taken centre stage in recent months, with many lenders falling foul of loans going into delinquency due to missed payments. This has been particularly relevant in the US market, where several lenders are predicting huge losses. This has had a knock on effect, with other lenders finding their funding lines now being curtailed or even withdrawn. The overall effect is that is it now more difficult to obtain a self certification loan the before. The main problem is that many lenders have reduced the Loan to values ( LTV ) to no more than 70%. This coupled with the decrease in house prices that many are predicting means that if your client is already over the 70% LTV with their current first charge, their options are somewhat limited.
With Self Certification, you may pay a higher rate of interest than a case which is considered a status case ie,employed with Payslips. This is usually due to the fact that you are a higher risk than someone with provable income. Even if your credit history is good and you have made all your contractual payments, you are generally considered a higher risk. Self Certifying you income can be done in several ways,you may simply fill out a self declaration form, or you may be asked to provide proof of self employment, eg, letter from the Inland Revenue,or you may be asked to provide accounts or an accountants reference. The amount of information you can provide can have an effect on the available lenders and the rates. Generally the more information you can provide,the better.
However, as with any market, the self employed/no proof of income market will recover since there is a demand, and whenever there is demand their will be supply, it is only a matter of time before additional lenders enter the market and current lenders relax their criteria.
Your cause can be greatly helped by choosing a good packaging company, who will have the criteria for all their relevant lenders, and will save you alot of time and credit searches, to help you through this and get you the Self Cert secured loan your looking for.
Alan Reed is a financial expert and writes for the following websites, http://www.chrysalisfinance.co.uk, http://www.e-loans4you.co.uk and http://www.e-securedloans4you.co.uk
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