How long does it take to get a secured loan? We’ve created this to-the-point guide to discuss the process of a secured loan application and how long it can take. 

You should always think carefully before choosing a secured loan due to the risks, but they can be beneficial. Get your crash course on these loans and discover how long they take here. 

What are secured loans?

A secured loan is a term used to describe a wide variety of loans that use assets as collateral within the credit agreement. The opposite of a secured loan is an unsecured loan, which does not use assets as security in the credit agreement. 

Before you apply for a secured loan, always do your research and only consider applying for a secured loan from a lender that is authorised and regulated by the Financial Conduct Authority. This will ensure you avoid illegal and scam lenders.

How does a secured loan work?

A secured loan will generally provide you with a lump sum amount (although some provide credit over a draw period) and you then repay this amount over a fixed term of monthly repayments. 

Those monthly payments are made up of a repayment on the total amount borrowed and the interest rate you agreed to pay. Some secured loans may require you to spend the money on specific purposes (some examples are provided shortly).

If you stop making repayments because you cannot afford the loan anymore, the lender will first notify you of your missed payments which can lead to defaults recorded on your credit report. If you do not engage with your lender to explain why you are unable to pay and renegotiate, any asset listed as security within the credit agreement may be repossessed and then sold. 

The money recovered from the sale of the asset is then used to pay the lender all of the outstanding loan secured against that asset, including interest and late fees. But if you make all repayments as agreed, your asset will never be seized and sold. 

Be aware that if you plan to repay early there might be early repayment charges applied. 

The benefits of a secured loan

Secured loans have two main benefits and they both come about because you are willing to use an asset as collateral and are therefore viewed as less of a lending risk. 

The first benefit is that you might be able to borrow more money with secured debts compared to unsecured loans, and by extension get a longer repayment loan term. This is especially the case if you’re borrowing against valuable assets like property or home equity. 

On the other hand, the biggest drawback of a secured loan is that it puts your asset at risk. Although you may be able to comfortably afford repayments now, there is always an element of risk that things could change in the future, such as unexpectedly being made redundant or becoming too sick to work. 

What are some examples of secured loans?

Secured loans come in different shapes and sizes. Here is a snapshot of some of these loans:

  1. Mortgage – a mortgage is a type of secured loan used to buy a house based on the value of your property you are buying. The property is used as collateral within the mortgage agreement.
  2. A second charge mortgage – this is a loan that borrows against some of your home equity and therefore the home equity is the collateral and the property can be repossessed to recover the debt. It is also known as a second mortgage, home equity loan or homeowner loan. 
  3. Secured personal loan – these are more generic secured loans that could use different types of assets as security. Some of them may be more specific to a purpose, such as debt consolidation loans or home improvement loans

The secured loan application process

Here is a breakdown of the secured loan application process:

  1. Taking the time to understand these loans, their pros and risks (you’ve started here!)
  2. Considering these loans against other credit options
  3. If you’ve decided a secured loan is what you need, searching options online and comparing deals
  4. Prepare your application to your chosen lender by preparing documents about income and debts
  5. Search your credit score to check there are no errors causing your score to be lower than it should be
  6. Getting an asset valued if required
  7. Lodging your application

How long does it take for a secured loan to be approved?

The length of time it takes to get a secured loan approved is between two and four weeks. The timescale can vary considerably between lenders. 

One of the biggest factors which will determine how quickly you receive a decision is your own administration organisation, as you will need to provide different documents. Another is if your asset being used as security needs to be revalued to help the lender decide how much they are prepared to lend. If it does, your application can take longer. 

When will I get my secured loan after approval?

Once your loan has been approved, you should expect to receive the loans in a couple of working days. Some lenders are able to transfer the money into your account within the same day as you receive a loan approved notice. 

Are secured loans easier to get?

Secured loans – including second charge mortgages –  are considered slightly easier to get approved for than unsecured loans. But that doesn’t make it easy. You’ll still need to provide proof of income and meet affordability criteria, as well as have your credit score assessed. 

What credit score is needed for a secured loan?

There is no fixed credit score required to get a secured loan and there are even secured loans offered to people with a poor credit score. However, bad credit secured loans typically come with a higher interest rate. 

If you want to access one of the better secured loans on the market, you’ll need to have at least a fair score, which is a different number depending on what credit reference agency you’re referring to. In regards to Experian, this would be around 680+. 

Is it easier to get a secured loan than a mortgage?

Getting a secured loan may be considered easier to get than a mortgage because a mortgage is usually for a greater amount of money and requires a significant deposit (based on personal circumstances, property value and the lender’s loan to value ratio).  

Yet, a mortgage is actually a type of secured loan used for a specific purpose. It is secured with the property you are buying, meaning if you cannot keep up mortgage payments then the bank that provides the mortgage can repossess it and sell it. 

What do you need to provide for a secured loan?

To apply for secured credit you will need to provide evidence of the value of the asset being secured, or you may be required to get a new appraisal. For example, you may require an up-to-date property valuation to work out how much equity you have. 

You’ll also need to provide proof of income, details of ongoing debts and give permission for the lender or credit broker to access your credit history. 

Uncover more secured loan guidance now!

A whole bunch of articles and guides about secured loans have just dropped here on MoneyNerd. If you want to learn more about borrowing through a secured debt, the process and the alternatives, click back to us soon! 

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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