Secured Loan Guide
A secured loan is any type of loan issued based on ‘security’ or ‘collateral’ provided by the applicant.
The provision of security to cover the cost of the loan serves as an insurance policy for the lender, allowing them to issue larger loans with extremely competitive overall borrowing costs.
Loan Amounts and Interest Rates
The amount an applicant can borrow will be calculated using the value of their assets and their financial circumstances at the time.
Most secured loan specialists will factor the following into their lending decisions:
- The current value of the borrower’s property/assets
- Credit score and recent credit history
- Any other outstanding debts or loans
- The applicant’s current income level
- General financial status and personal circumstances
Independent valuation of the applicant’s assets will play a key role in determining how much they can borrow in the form of a secured loan.
Why Should I Choose a Secured Loan?
One of the biggest advantages of a secured loan is the opportunity to borrow more than would be available with a personal loan. Most major banks and lenders restrict personal loans to sums of £10,000 or less, with a secured loan, it’s possible to borrow any sum from £10,000 upwards – no upper limitations whatsoever.
Secured loans are typically issued with more competitive interest rates and overall borrowing costs. This is because loans backed by security are considered lower risk on the part of the lender.
For applicants with a poor credit history or no formal proof of income, unsecured borrowing simply isn’t an option. As the provision of security is the primary factor with secured loans, specialist lenders are often willing to consider poor credit applicants for secured lending.
How Can I Get the Best Possible Deal?
As with all financial products, the key to getting the best possible deal on a secured loan lies in comparing the market. Online comparison sites are not without their value, though typically fail to cover the UK’s independent specialist lenders. You may find that your ideal secured loan is not available on the High Street, which is where an independent broker can help.
There are some specialist secured lenders that do business exclusively via approved brokers, often undercutting the best deals available from major lenders. It is therefore strongly advisable to consult with an independent broker, in order to access a comprehensive market comparison.
Am I a Good Candidate for a Secured Loan?
Establishing whether you are a good candidate for a secured loan means taking two things into account:
1. Your eligibility and the value of your property
2. Your capacity to comfortably repay the loan
If you qualify for a secured loan and have 100% confidence in your ability to repay the loan as agreed, you could be an ideal candidate. You could also gain access to an extremely competitive deal, with much lower rates of interest and overall borrowing costs than a comparable unsecured loan.
Any issues with your credit history or employment status may stand in your way with major lenders, though will not necessarily be an issue with smaller independent lenders. If you have any questions or concerns, be sure to discuss them with an independent broker before applying.