Technically speaking, a personal loan of a modest size is easier to arrange than a secured loan. You can apply for an unsecured loan online with a long list of banks in a matter of minutes, with no real complexities involved.
With secured lending, the application process is a little more involved. This is due to the fact that the lender needs to assess the viability and value of the assets (collateral) you intend to use as security for the loan.
Securing funds against assets of value is inevitably more complex than arranging a personal loan based on the applicant’s merit. Even so, secured borrowing can be advantageous in many ways, including the following:
- Secured loan interest rates are almost always lower than unsecured loan rates
- There are no upper limits on how much can be borrowed with a secured loan
- Secured loans can be taken out by applicants with a poor credit rating
- Overall borrowing costs on a secured loan may also be more competitive
The additional time it takes to process a secured loan application is therefore a small price to pay when considering the benefits of secured borrowing.
But what specifically do lenders look for in a secured loan applicant, when processing applications and making their decisions? Which are the main factors that will determine your eligibility (or otherwise) for a secured loan?
Common Criteria Among Secured Lenders
Terms, conditions and lending policies vary significantly from one provider to the next. However, most lenders focus on the same basic criteria, when processing applications for secured loans.
In order to qualify for a secured loan of any size, you will need to meet the following basic requirements:
- Be a resident of the UK aged at least 18 or over at the time you submit your application.
- Have assets of value to use for security for the loan, which must equal or exceed the total value of the loan you intend to take out.
- Depending on the type of loan you are applying for, you may need to provide evidence of when and how you intend to repay the debt.
- Affordability checks will usually be performed, including verification of your employment status and your annual income.
- Most secured lenders perform credit checks as part of the application process, but there are subprime secured loans available for applicants with poor credit.
- You will also be asked to provide a declaration of any other debts or significant outgoings you have at the time of your application.
It is important to remember that upon entering into a secured loan agreement, you provide the lender with the legal right to repossess your assets in the case of non-repayment.
For this reason, it is essential to seek independent broker support before applying, in order to assess your suitability for a secured loan.
If you choose to go ahead, your property finance broker will negotiate on your behalf to ensure you get an unbeatable deal from a top-rated lender you can trust.
