When applying for a secured loan, because it is secured against a property or valuable asset, you typically need to provide the lender with some key documentation as proof of income, ownership and affordability, including:
- Proof of identity (passport, drivers license)
- Proof of employment status (payslip, accountant’s details or SA302)
- Proof of income (payslip, bank statement, accountant’s details or SA302)
- Proof of address and ownership (utility bill or mortgage bill)
Some secured lenders require you to send this information in the post, so you can print or scan documents and simply mail them to the lender. The majority of lenders allow for documents to be sent online, which can speed up the process.
A lot of these documents are sent to you every month from your employer, energy supplier or mortgage provider, but each one should also have an online portal where you should be able to download this information, print it off or forward it to your secured lender by email.
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What Information Does a Secured Lender Need to Know?
To confirm your eligibility for a secured loan, a lender needs to confirm:
- Full name, DOB and address
- Employment status – are you full-time, part-time or self-employed
- Your monthly income
- Details of the property being used as security i.e address, valuation
- Affordability and how you are going to repay (via income, rent or sale)
How Does The Secured Loan Application Work?
With a secured loan, you are borrowing money against the value of a property that you own or are looking to buy. You may wish to secure the loan against your family home (also known as a second mortgage) and this is common for households who need to raise funds for home improvements, pay for weddings or to consolidate debts.
You may also use a secured loan in the form of a buy-to-let mortgage, whereby you purchase a property for the purpose or renting it out to tenants. The loan is always secured against the property in question and you need to carefully think about how much you need to borrow and how much you can afford to repay. Otherwise, if you fall behind on payments, your property could be repossessed by the lender looking to recover their costs.
The Process for a Secured Loan is Typically as Follows:
A Fact Find is usually the starting point for a secured loan to confirm a customer’s basic details such as full name, date of birth, address, employment status, loan requirements and property type. On this basis, the lender will assess if the customer is right for a loan and offer basic terms and will proceed to request more information.
Credit searches are often carried out to assess a customer’s creditworthiness and how well they have repaid other types of credit and loans in the past.
Land registry searches are conducted on the property in question and to highlight any potential issues or reasons why the loan may not progress.
Based on these searches, you may find that the indicative terms may be adjusted with a higher or lower interest rate and LTV.
The lender may need to arrange a valuation of the property. A lot of valuations today can be automated using different technology, but some will need to be done manually and this requires a visit from a surveyor. This can take a few days for the surveyor to have availability to visit the property and then a few days to write up and confirm the report.
Final Checks and Documents
As a final stage, there are a number of checks to be completed by the lender and their solicitors including fraud checks, quality checks and a check by senior management to fully review your application. You are likely to be sent final documentation to sign and complete and if approved, your loan will be ready for funding.
How is The Application Different for an Unsecured or Personal Loan?
With unsecured loans and personal loans, the role of income and affordability is still key for your eligibility but because there is no property being used as security, the process is usually a lot quicker.
Your income and credit status are important to approve your unsecured loan and the lender may request proof of income and employment. But since there are no property checks or valuations involved, a personal loan can often be approved within 24 hours and funded on the next day.
Do I Need To Own The Property Outright for a Secured Loan?
No, not at all. As a homeowner, you may have only paid off a part of your mortgage and you will be able to borrow based on the amount of the property that you own.
It is very common to have a residential mortgage and to take out a secured loan or second mortgage if you need additional funds.
If you own the property outright, you can be eligible for a secured loan and potentially borrow a larger amount.
For buy to let mortgages, this is based on a property that you are looking to buy to rent out to tenants – and therefore you are not required to be an owner of the property.
How Long Does it Take To Apply for a Secured Loan?
A secured loan can take around 2 to 4 weeks depending on how quickly you can respond to the lender and give them the information they require. Some secured lenders offer a completely online submission which makes the process a lot faster, whilst some providers still like to receive and send out documentation in the post which can make it a little longer.
A secured loan takes a little longer than an unsecured loan or personal loan, which takes just a few days. This is because there is more paperwork involved and there are other searches involved with the property such as the lender may need to arrange a valuation which can take a few days to schedule and then report back.
It is important not to rush the process and make sure that you can provide all the correct information that the lender needs. Once fully approved, it is typical for funds to be transferred to your bank account within a matter of hours or days.
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