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What Is the Secured Loan Approval Process? 

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Scott
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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

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&
Janine
Janine Marsh Profile Picture

Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Mar 4th, 2024
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Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

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secured loan approval process

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

This easy guide will help you understand what a secured loan is, how it works, and what you need to do to get one.

Every month, over 6,900 people visit us for advice on secured loans, so you’re in the right place to get all the facts.

In this guide, we’ll cover:

  • What a secured loan is.
  • How a secured loan works.
  • The true cost of a bad secured loan.
  • How to get approved for a secured loan.
  • How long a secured loan takes to complete.

In the UK, early repayment fees for secured loans have more than doubled since the start of the decade, peaking in 2018.1 These changes highlight the importance of being well-informed before making any financial decisions.

Don’t worry; we’re here to help you make the best choice.

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How much do you want to borrow?

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.

Search powered by our partners at LoansWarehouse.

What is the secured loan approval process?

The secured loan approval process goes something like this:

  1. You apply for the loan by entering your personal data, income, property value, etc.
  2. You have to supply documents and proof to back up the statements you make in the application, such as evidencing ownership of the property or your income.
  3. The lender finalises the application and may need to complete further checks, including a check of your credit report.
  4. If approved, the lender deposits the loan amount into your bank account.

There may be variations depending on the lender’s processes. 

» TAKE ACTION NOW: Compare deals from the UK’s leading lenders

Secured Loan Case Study

Check out the table below for a snapshot of how secured loans work, including what lenders and borrowers need to consider.

If you want to learn more about the risks and benefits of secured loans, be sure to read our specialized guide.

Category Details
Background Borrower: John, a homeowner in the UK.
Financial Situation: Stable income, owns a home, needs additional funds for home renovation.
Loan Requirement: £20,000.
Loan Process Application: John applies for a secured loan from a bank or a financial institution.
Property Valuation: The lender assesses the value of John’s home to determine how much they can lend.
Credit Check: The lender conducts a credit check to assess John’s creditworthiness and repayment history.
Loan Offer: Based on the valuation and credit check, the lender offers John a loan of £20,000 with a specific interest rate.
Loan Terms Amount: £20,000.
Interest Rate: Variable or fixed, depending on the agreement, say 5%.
Repayment Period: 10 years.
Monthly Repayment: Depends on the interest rate and term, but let’s assume £212 per month.
Total Repayable Amount: £25,440 (£20,000 principal + £5,440 interest).
Benefits Lower interest rates compared to unsecured loans due to collateral.
Longer repayment periods.
Larger loan amounts can be borrowed.
Loan used for home renovation.
Risks John’s home is at risk if he fails to make repayments.
Potential for negative equity if the property value decreases.
Early repayment charges may apply if the loan is paid off early.
Outcome Loan Repayment: John successfully repays the loan over the 10-year period.
Impact on Credit Score: Positive, as John made regular payments.
Property Value: An increase in home value due to renovations and market conditions.
This case study provides a general overview of how secured loans work and the considerations involved for both the lender and the borrower.

What happens when you apply for a secured loan?

After you have applied for a secured loan, you’ll need to await the lender’s decision.

If the loan has been secured by home equity – which is highly likely – then the lender may need to confirm your amount of equity.

To do this, they would need to value the property.

Sometimes, this requires the lender to send surveyors out to the property to complete an in-person appraisal.

However, in modern times, many lenders are able to accurately value properties remotely using sophisticated technologies and data. 

In a nutshell, you may need to wait until after a property appraisal before the lender reaches out and tells you its decision.

If approved, the lender will deposit the loan to your nominated bank account. Repayments will start immediately, which usually means the following month. 

Change the amount you are looking to borrow to see what offer you could get

£

Lender

APRC

Monthly payment

Total amount repayable

United Trust Bank Ltd

6.34%

£219.34

£26,320.83

Pepper Money

6.86%

£220.24

£26,429.17

Together

7.99%

£222.20

£26,664.58

Selina

8.45%

£223.00

£26,760.42

Equifinance

9.95%

£225.61

£27,072.92

Evolution

10.2%

£226.04

£27,125.00

Spring

10.5%

£226.56

£27,187.50

Loan Logics

11.2%

£227.78

£27,333.33

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.

Search powered by our partners at LoansWarehouse.

Is it easier to get approved for a secured loan?

Secured loans are generally considered to be easier to get approved for compared with unsecured loans. 

The lender doesn’t face as big of a risk when lending to people with a secured loan.

It knows that it can recover any missed payments and defaulted loans by forcing the sale of the asset used as collateral. 

This is why secured loans are also offered for greater amounts than unsecured loans, and, in my experience, they usually have more competitive interest rates.

But it’s important to realise these benefits in conjunction with the risks.

A secured loan puts your asset – usually your home – at risk of foreclosure. 

If you fail to make repayments on a secured loan, it will also affect your credit score and, therefore, your ability to borrow in the future.

Secured loans for all purposes

  • Stuck paying high interest on credit card debts & loans?
  • Looking to fund a home improvement project?
  • Dreaming of finally taking the once-in-a-lifetime trip?

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“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”

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Do I need proof of income for a secured loan?

You’ll need to prove your income as part of the secured loan application process.

Even though the loan is secured with an asset, the lender still needs to make sure the loan is affordable to you, which requires them to ask for proof of your income. 

They use your income and any existing debts you have to pay to calculate your debt-to-income ratio. This ratio helps the lender decide whether the loan amount needed will be affordable based on your financial circumstances. 

Most people choose to prove their income with recent payslips.

You may need as many as three. Some other people with other sources of income could choose to prove their income with bank statements, letters from their accountant, or HMRC tax returns

How long does a secured loan take to complete?

A secured loan approval process can take anywhere from two to six weeks to be completed. 

The reason that a secured loan takes much longer than unsecured lending applications is that more checks are required. The lender may even need to complete a property appraisal (re-valuation). 

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References

  1. Uswitch – UK mortgage statistics, 2023
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The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Financial Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.