A second charge is a way of securing a loan against a property which already has a loan secured against it by another lender (a “First Charge Holder”).
Should the loan secured by the second charge not be repaid on time, the owners of the second charge will usually have the same rights to recover the loan as a First Charge Holder. However, the loan to the First Charge Holder must be paid off from any sale proceeds of the property before the loan secured by the second charge can be repaid. As a result of this, a second charge carries more risk due to the possibility that there may be insufficient monies left to repay the loan secured by a second charge, after the First Charge Holder has been repaid in full.
Please see our information on Managing Risk here.