Secured Loan Application Process – Step by Step Guide

Are you keen to know how a secured loan works? Worry not, as we've got all the details sorted for you. Our goal is to make this process as clear as possible for you.

In this simple guide, we’ll explain:

• What a secured loan really is.
• The risks of a bad secured loan.
• The good and bad sides of secured loans.
• Other ways you can borrow money.
• How to get a free secured loan quote.

We know that loans can be scary and you may be worried about getting into more debt. But remember, you’re not alone in this; we’re here to guide you through each step, so you can make the best decision for your situation. Let’s start learning about secured loans together.

What is the process for a secured loan?

The process to get a secured loan can be divided into different stages, namely:

1. Calculate how much you need to borrow
2. Calculate your home equity
3. Compare secured loans
4. Work out if you can afford a secured loan
5. Search your credit report for errors
6. Submit the application
7. Send or upload documents and evidence
8. Await (a property appraisal and) a decision

Standard secured loan application process

The eight stages above can be categorised into two research stages and the application stage. 

Researching stage #1

The first task when considering a secured loan is to work out how much you need to borrow. It would be a big mistake to take out a loan only to realise you didn’t borrow enough and need another loan, or you overborrowed and are unnecessarily paying interest on the extra amount. 

Calculating how much you need to borrow

Calculating how much you need requires you to find out the cost of what the money will be spent on. If you’re going to use it to get a new kitchen, find out how much the kitchen you will buy costs and get accurate quotes from multiple kitchen fitters to understand the total amount you need to borrow. 

Calculating the value of the asset

The next task is to calculate the value of the asset which will be used as security. As most secured loans are secured with home equity, you’ll need to work out your home’s current market value (not what you paid!) and subtract the outstanding mortgage balance and any other debts secured by the property. 

There is no universal rule allowing you to borrow 80% of your existing equity. Lenders assess the total secured borrowing against the property value, alongside affordability, credit history and their own limits. For example, a maximum combined loan-to-value limit must include the existing mortgage.

Researching stage #2

The next research stage is all about looking at your loan options. You should search the different secured loans on the market based on the amount you need to borrow and the value of your asset. 

It may be worthwhile speaking with a loan broker who can help you understand what’s on offer and find suitable loans. 

Consider additional fees

It’s also important to consider any additional fees which might apply as part of the loan, such as application fees, appraisal fees, early repayment fees, and late payment fees.

Work out if you can afford the loan

Once you understand the current market options, it’s time to work out if you can afford the loan. Will the loan repayments be manageable for your individual or household income? Or will they put a squeeze on your budget? The lender will make these calculations itself, but it’s good to get an idea of affordability yourself beforehand. You may not want to progress to an application. 

Check your credit score

If you do believe a loan is affordable for you, there is one more task before applying. It’s time to put your credit score under the microscope. Use an online credit reference agency to search your score and look for errors. An error that damages your score could lead to a loan rejection. If you do see mistakes, you can ask the company responsible to correct them. 

Application stage

Next, it’s time to submit your loan application. Most lenders now allow the application to be submitted online, including high-street banks. You’ll need to answer simple personal questions throughout the loan application, including for both people if it is a joint loan. 

You’ll then be asked to verify answers by sending documents and proof to the loan provider. Often, scanned copies can be uploaded as part of the online application, or they may need to be sent. 

Once all documents have been received, it can take a little while before a decision is made. The loan provider may want to carry out an appraisal of your property to verify the amount of home equity you have. There may or may not be a charge for this service. 

What proof do you need for a secured loan?

During the secured loan application process, you’ll need to supply different types of evidence to the lender. 

You’ll generally need to:

• Prove your identity, usually with a passport and/or driving license
• Prove you own the asset used as collateral, usually a property, and therefore, the deeds of the property
• Prove your income with payslips or tax returns

Proof may need to be taken to a bank branch, sent in the post, or uploaded to a loan provider’s online application process. 

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

Timescales vary with the lender, valuation, legal work and the completeness of your documents. Ask for an estimate for your application; approval and completion are not guaranteed within a fixed period.

The secured loan provider will need this amount of time to carry out identity and document checks, credit history searches, and value the asset – usually your property – that is being used as security. 

Secured loans can take longer than unsecured loans because the property valuation, security and legal checks add steps to the process. Some unsecured lenders offer faster decisions, but timescales vary.

Will I get accepted for a secured loan?

To get approved for a secured loan, you’ll need to meet the lending criteria set by the loan provider. 

Each loan provider can apply its own criteria, and some may be more strict than others. Thus, it’s not possible to say whether you will be approved for the secured loan or not. 

If you have a less-than-satisfactory credit score, you might still get approved for the secured loan. But again, it depends on the details and the lender’s criteria. 

In my experience, it can be very beneficial to consult a financial advisor who can provide expert advice tailored to your own situation.

Here, this forum user on MoneySavingExpert is looking for advice on whether they are likely to be accepted for a secured loan.