There is a growing trend of internet surfers searching for secured loans online, but many of them are actually searching for a “secured loan direct lender”. If you’re unsure what a direct lender is and are about to go hunting for your own secured loan deal, you’re going to need to hear this first. 

There’s a good reason why people are searching for secured loans from direct lenders – and you could benefit too! 

What’s a secured loan?

A secured loan is a loan with the requirement that the borrower lists one of their assets as collateral in case the loan goes unpaid. 

You can find different types of secured loans, from generic loans and homeowner loans to second charge mortgages. Most of the time, a secured loan asks the lender to use their home or home equity as security in the credit agreement. 

You should think carefully before securing any debts against your home as your home may be repossessed if you cannot keep up repayments. And only consider legal lenders that are authorised and regulated by the Financial Conduct Authority. 

How do secured loans work?

Most secured loans work by providing the borrower with a lump sum amount, but some may provide the loan in instalments over a draw period. When a lump sum is paid out, the borrower must pay back the loan over a fixed period consisting of monthly payments until everything is paid back along with the agreed interest. 

If your finances improve during the course of the loan term, you might choose to pay the loan off in full early. However, doing so usually incurs an early repayment charge. 

If you cannot afford your monthly repayments anymore, you should swiftly tell your lender and try to negotiate a new repayment plan that benefits both parties. Avoiding the issue will result in multiple payment defaults, and the lender can then progress to repossess the asset you used as collateral in the agreement – and then sell it. 

Money raised from the sale of the asset will be used to pay off your arrears, remaining loan balance and possibly an array of fees and charges. If there is money remaining, this will be yours to keep. 

Are homeowner loans a secured loan?

Homeowner loans are a type of loan advertised by banks and some online loan providers. They may be advertised either as a secured or unsecured loan. 

Secured homeowner loans are loans for homeowners that use their property or home equity as collateral in the credit agreement. Most of the time, they are chosen to help fund home improvements but can be used for other reasons. 

You can read more about homeowner loans here

Where is the best place to get a secured loan?

The best place to get a secured loan will not be the same for everyone. The loan arrangement offered to you may be different from the next person because they are based on individual finances and your credit score. 

However, you might be able to save money by searching for a loan yourself from a direct lender, rather than using a credit broker website. We discuss this topic in detail later in this guide. 

How can I spend the money?

If you take out a secured loan, you can usually spend the money on any purpose you wish from holidays to new cars, such as homeowner loans and generic secured personal loans. 

But there are a handful of secured loans that must be spent on specific purposes. For example, a secured debt consolidation loan or secured home improvement loan must be spent on consolidating debts or completing home improvements, respectively. 

Where can you get a secured loan?

Secured loans are offered by online loan companies, UK banks and building societies. If you want to secure the loan with home equity by taking out a second charge mortgage or homeowner loan, then you may even be able to get these loans from a mortgage provider. 

Another option is to use a credit broker. A credit broker is a company that works as a middleman to help people looking for a loan find suitable options that match their needs. However, using a credit broker can come at a cost and you may be subject to ongoing fees and commission, pushing up the price of your loan. 

Can you get a secured loan without a broker?

You do not have to use a credit broker when taking out a secured loan. It is possible to search the market yourself by looking online and contacting banks to find out what they offer, and then you can compare different loans to find a beneficial deal for your personal circumstances. 

Using a broker can be advantageous to some people, and for others, they are not needed. If you decide to do the hard yards yourself, remember to only look at loans from lenders that are authorised and regulated by the Financial Conduct Authority.  

What is a direct lender?

A direct lender is a company that provides the person with a loan directly. They are the company that gives the borrower the loan money and receives repayments with no middlemen involved. 

Sometimes you can be fooled into thinking you are dealing with a direct lender when you are in fact dealing with a type of credit broker company. 

One example of a secured loan broker that appears like a direct lender at first glance is Ocean Finance. Ocean Finance captures your preferred loan and searches from over 100 loan providers to find the best loans that you’re eligible for. They don’t provide you with the loan themselves as a direct lender would. 

Secured loan direct lender – best examples!

The best examples of direct lenders of secured loans are UK banks, such as Santander, Nationwide, Halifax, HSBC and many more. All UK banks provide secured loans themselves and no other company is involved. 

There are also scores of online loan providers that are also direct lenders. But it is on the internet where you are more likely to find companies operating as brokers trying to masquerade as direct lenders.  

They are not doing anything illegal, and the likes of Ocean Finance make it clear what service they provide. However, there are others that try to conceal the fact they are not a direct lender. 

Is OPLO a direct lender?

OPLO is an online loan provider in the UK and declares itself as a direct lender. OPLO provides the secured loan itself with no other company involved. These secured loans are available from £5,000 to £100,000 and are a type of homeowner loan that uses the property as collateral in the loan agreement. 

Is Evolution Money a direct lender?

Evolution Money claims to be both a direct lender and credit broker. They state on their website that if your application doesn’t meet their requirements then they will pass on your information to other lenders and brokers. They offer secured homeowner loans using your property and home equity as collateral. 

Are secured loans from direct lenders cheaper?

Secured loans from direct lenders are usually cheaper than using a credit broker or indirect lender site to find a suitable loan because there are no additional fees to pay. 

A broker or indirect lender will usually take a commission from your loan repayments or even charge you to search for loan options. Thus, doing the work yourself to find the best deals can save you money, although it is likely to take longer. 

However, using a broker or indirect lender to find your loan may help you find a deal that you might have missed. In these instances, using an indirect lender could save you money, despite any additional fees you have to pay. 

But this depends on if the company searches the whole of the market. If they only search through partnered loan providers, which is usually the case, then the broker company may cause you to miss a better deal from a lender that they are not partnered with. 

The bottom line is that using a direct lender for a secured loan may or may not be cheaper. It all depends on personal circumstances. 

The benefits of getting a secured loan from a direct lender

A potential benefit of using a direct lender is that you can save money compared to using a credit broker or other type of indirect lender. By avoiding these middlemen companies, you deal directly with the company that is providing the loan, slashing fees and the overall cost of your loan. 

But another benefit of using a direct lender is the simplicity of communicating with your loan provider. It is often easier to speak about your loan and receive swift customer service when you are dealing with your loan provider directly. This may be even more noticeable if you need to call up and renegotiate your loan repayments due to unforeseen financial difficulty. 

What are the best direct lender secured loan rates?

The best interest rates offered on secured loans through direct lenders are between 2% and 10%. To secure a lower interest rate like these, you’ll need to have strong personal finances and good credit history. 

When you search for secured loans with direct lenders, you’ll notice they advertise their loans with a representative interest rate. This is the highest rate offered to 51% of their applicants. The representative example changes based on the total amount of money you want to borrow. 

When you compare secured loans with direct lenders, it is essential to remember that these interest rates are not guaranteed and almost half of loan applicants receive a higher interest rate. 

If you see a loan rate that is exceptionally low, be cautious of that lender. It may be that they are a scam lender and not operating legally. 

Would I qualify for a secured loan?

Whether you choose to use a credit broker or a direct lender to apply for a secured loan, you’ll still need to be approved. To be eligible to apply for a secured loan, you must meet that lender’s eligibility criteria. 

The basic criteria are that you are of a certain age, live in the UK on a permanent basis and that you have the asset required to secure the loan. For example, to take out a homeowner loan you may need a minimum amount of equity in your home. 

Your application will include information on your regular income and ongoing debts, such as any other credit cards, loans or monthly payments on a mortgage. The lender will use this information and see whether your debts – including the prospective secured loan – would be affordable on your income while also paying for essential living expenses. 

Every lender can apply its own affordability test, so there is no fixed percentage of your monthly income that needs to cover all debts. However, it is recommended that all your debt payments are payable with at most 40-50% of your income. 

On top of these affordability tests and possibly other financial assessments, loan lenders will want to check your credit file. They will look to see if you have been made bankrupt and search for payment defaults on other debts. If you have a bad credit history, they may decide you are too much of a risk and deny you the loan. 

Can I get a direct lender secured loan with bad credit?

It is still possible to be approved for a secured loan with a poor credit score. If you have poor credit but are still approved, it is likely that the lender will offer you a loan with a higher interest rate because you are considered more of a lending risk. There is no fixed credit score required to get approval and each lender applies its own judgement based on everything included in your application. 

And now there are more lenders popping up targeting people with an unsatisfactory or poor credit history. These lenders are specifically advertising secured loans for bad credit individuals. A bad credit secured loan should increase your chances of getting approved if you fall within this category, but nothing is guaranteed. 

You can discover more about homeowner loans and secured loans for bad credit, right here!  

Secured loan direct lender – quick recap!

So, a secured loan direct lender is a company that provides you with your approved loan directly, rather than using other companies and credit brokers to find and apply for your loan. Avoiding credit brokers can save you money.

Some credit broker websites look and feel like direct lenders of secured loans, so be careful and check the small print at the bottom of their homepage for details on how they really operate. 

We have more on secured loans and direct lenders!

Discover much more on these loans, direct lenders, credit brokers and even bad credit secured loans, right here on MoneyNerd. We’ve been releasing lots of new articles of late and focused on secured loans. 

Read our new and updated content to equip yourself for the loan market without needing a credit broker! 

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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