A secured loan is a loan secured on your property in the same way a mortgage is – in fact
As of April 2014, the FCA became responsible for the regulation of the secured loans, which now treats secured loans in the same way as any other regulated mortgage contract.
These days it’s not uncommon for a mortgage advisor to look into a secured loan option as well as exploring the possible re-mortgage option. Why? Well, there are often many reasons, for example, a client may have a mortgage balance of £300,000 and needs to raise £25,000 for home improvements.
The £300,000 maybe on such a good rate switch the full £325,000 to a new provider may not be cost effective.
A client may have had a perfect credit score when taking out their mortgage – but things out of their control (e.g. loss of job) may have caused them to have a few blips on their credit profile. Now back in full-time work they want to raise funds but are being offered a higher rate on a new mortgage because of the drop in their credit score. It may be worth leaving the current mortgage in place and taking a secured loan out separately.
Or speed is key – a secured loan can complete in a matter of weeks whilst mortgage are often months.
How does the secured loan process work?
Below we have broken the stages in the most simplistic form giving a step by step guide.
- You approach a broker to source a secured loan most suited to your needs
- Once sourced and the recommendation is made, your broker will issue the papers normally while requesting
- Income proof (payslips or tax returns (SA302) for self-employed
- Any other paper needed to support the application e.g. settlement figure from a loan you plan to pay off
- Once your documents arrive back with your broker they will be checked to confirm everything is in order
- Your broker will then contact your mortgage company to request a 12-month statement and inform them they plan to register a charge on the property as well. THIS IS OFTEN THE BIGGEST DELAY WITH THE PROCESS – LARGE BANKS AND BUILDING SOCIETIES INTERNAL ADMINS DEPARTS OFTEN HAVE TURN AROUND TIMES OF 5-7 WORKING DAYS.
- Once your mortgage company has responded the final stage will be a valuation of the property – There are 3 potential options. An electronic valuation is done by inputting your property details into the lender online valuation system, a drive-by valuation where a local surveyor will value the property from the roadside or a full internal valuation
- Once the valuation is in, your broker will submit your case to the lender.
- At this point the lender will double check the file – they may ask for another supporting document at this point.
- Once happy the lender will issue the binding offer for you to sign.
- Once the offer is signed and returned to the lender the application will complete.
The process normally takes 4 to 5 weeks
Frequently asked questions about secured loans.
- How long does the secured loan process take?
On average normally around 4 weeks but can be quicker/longer depending on how complex the application is
- Will you need income proof?
Yes. Last 3 payslips for employed applicants or SA302s and tax overviews for self-employed application’s or an accountants certificate
- I’m married but the property is just in my name – can the loan be just in my name?
Yes. We have lenders that will allow the loan to be just in your name. You can add your partner to the loan and they do not have been jointly owning the property.
- I have bad credit – will there be any options for me?
Yes. Depending on how recent the bad credit is and more importantly how did it occur.E.g. Illness and being off work which impacted on finances is understandable but if you decided to go on holiday and not pay your credit commitments then it’s unlikely you will be offered anything
- Can you self-cert your income for a secured loan?
- Can you repay secured loans early?
Yes – some lenders have early repayment charges, and some don’t.
- Are there fees to set up a secured loan?
Yes – normally a lender fee and broker fee which most people opt to have added to the loan and built into the monthly payment.
- How long do I need to be self-employed to get a secured loan?
Minimum of 1-year tax return (some lenders may need more)
- Can I get a secured loan if I have pay day loans?
Some lenders will allow payday loans but there must be a good reason why they were used.
- Can I take a secured loan out for business purposes?
Yes, some lenders will allow this
- Who pays for the valuation?
Most of the time the broker will pay.