Secured loan application process

A secured loan is a form of borrowing that you take out against an asset, typically your home. With your asset acting as collateral, there is less risk to the lender, so you may be able to borrow more at better rates with a secured loan  than with an unsecured loan. 

Each provider will have their own application process, but there are some general procedures shared by most, which we will explain in this article.  

It’s important to weigh up the pros and cons and consider how much you can afford to pay before you apply. Remember, if you fall behind with your repayments, your home could be put at risk. 

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1. Work out how much you need to borrow

Secured loans (also known as homeowner loans) tend to range from from £10,000 upwards. But if you are offered a large amount by a lender, it doesn’t necessarily mean you should accept it. Otherwise, you could potentially end up spreading yourself too thin. Borrow only what you can afford to repay each month for the full duration of the loan. And try to factor in some margin for unexpected costs, like emergency repairs.

Before you apply for a secured loan, consider what you want to use the money for and how much you need to borrow. 

It’s important to remember that with secured loans, your home could be at risk of repossession if you don’t keep up with the loan repayments. So, you also need to think carefully about how much you can afford to repay each month over the term. Bear in mind that if you consolidate your existing borrowing, you may be extending the term and increasing the amount you repay in total.  

Your affordability will depend on a few factors, including your income, your individual circumstances, and how much equity you have in your home.

2. Work out the equity you have in your property

You can work out the equity you have in your home by deducting the amount you owe on your mortgage (and any existing secured loans) from the current value of your property. The difference remaining is what we call equity. 

For, example, if the value of your home is £300,000 and you have £200,000 outstanding on your mortgage, you will have £100,000 (or just over 33%) equity in your property. 

Bear in mind that you can only borrow up to a certain percentage of the equity you have. This is set by the lender. Lenders apply caps on borrowing to reduce the risk of you going into negative equity (where you owe more than your house is worth). 

3. Check your credit score

It’s a good idea to check your credit report for free with one of the three main credit reference agencies in the UK (Experian, Equifax or TransUnion) or through our partner, CredAbility. Then you can identify if there are any mistakes that need to be corrected. Any mismatched data (like your name and address) can affect your credit score. So, if you spot any errors, you’ll need to get in touch with the lender or credit reference agency involved as soon as possible to rectify them.

Each lender uses its own lending criteria when assessing credit applications. But generally speaking, the higher your credit score the more likely you’ll get accepted and obtain the best interest rates. This is because lenders use your previous financial behaviour to predict your future behaviour. So if you have a good credit history, you will appear as a reliable borrower from their point of view.

Having said that, if you have a bad credit history, it may still be possible to obtain a secured loan. Some lenders and brokers, like us, specialise in lending to people with less-than-perfect credit scores. Also, if you have a lot of equity in your property this could work in your favour. Some lenders see this as balancing out some of the risk they are taking in lending to someone with bad credit. 

Or you may prefer to work on improving your credit score before you apply, in order to boost your chances of getting accepted. You can gradually increase your score over time by maintaining your payments on time, every time, for example. For more tips, read our ultimate guide to improving your credit score.

4. Compare loans

1. Use eligibility checkers

Many lenders and brokers, like us, have eligibility checkers which show you the likelihood of getting your application accepted before you apply, without affecting your credit score. You can use this tool to shop around and find the best deals. They only perform soft checks on your credit report, so you can use them as many times as you like.

2. What is the APRC?

Before you apply for a secured loan, make sure you check the APRC. 

APRC (annual percentage rate of charge) represents the total cost of a secured loan or mortgage to the customer, shown as an annual percentage of the total loan amount. It includes all interest rates and charges applied over the full loan term, making it useful for comparison.   

Note, where you see a ‘representative APRC’ advertised, this means 51% or more of customers receive this rate or better. 

3. Are there any early repayment charges applicable?

Check if there are any early repayment charges applicable for leaving your deal early. For example, if you come into some money in the future, will you be charged an early repayment charge for paying off your loan before your deal ends? Some lenders charge a fee to offset some of the interest they lose out on in this situation.

How long does the secured loan application process take?

As an estimate, the application process for a secured loan can take around three or four weeks, but the timescale varies from lender to lender. It takes longer to get a secured loan compared to a personal loan because there’s more paperwork involved due to the loan being secured against your property. Also, the lender may need to organise a valuation of your property before they can draw up an agreement and transfer the funds.

The timescale also depends on a number of other factors, such as:

  • how you apply (it's quicker online than in the post)
  • how quickly you complete and return the paperwork requested by your lender

The quicker you provide the lender with all the information they need, the sooner you should get your loan. But don’t rush it. Any mistakes or incomplete information can slow the process down because we’ll have to spend time chasing up further information from you.

When will I find out if I’ve been accepted?

If you use an eligibility checker, you could find out the likelihood of being accepted in less than 5 minutes. The quotes you get are often subject to affordability assessments, your individual circumstances, and the lender’s criteria. The lender will also usually request evidence to support the information you have entered, to make sure it is true and accurate.

Can I take out a secured loan if I’m moving?

If you are planning on moving house soon, then it probably isn’t the best time to apply for a secured loan against your current property, for several reasons.  

One reason is that your home acts as security for the lender, so if there is a chance this will not be the case in the near future, the lender may decide to decline your secured loan application. Plus, secured loans are not designed for short-term borrowing, so you could consider whether a different form of credit may be better suited to your needs and circumstances. 

If you already have a secured loan against your home and are looking to sell up, you will normally have to pay off the loan before you move

What documents do I need for a secured loan?

We’ll let you know what documents you will need to provide. It varies from person to person and depends on your individual circumstances. Some example documents include:

  • your application form
  • bank statements
  • proof of income and expenditure

Read our helpful guides to learn more about loans.

Secured Loans from £10,000 to £500,000

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Secured loans are secured against your property.

Disclaimer: All information and links are correct at the time of publishing.

Zubin Kavarana, Personal Finance Writer

Zubin Kavarana

Personal Finance Writer

Zubin is a personal finance writer with an extensive background in the finance sector, working across management and operational roles. He applies his experience in customer communication to his writing, with the aim of simplifying content to help people better understand their finances.