A secured loan can be a great way to get your hands on a significant sum of liquid cash in a comparatively short time. Secured loans are popular as they offer lower interest rates and higher loan amounts than unsecured loans.
Secured loans are comparatively complicated to set up, so it could be 2-3 weeks before the money arrives in your bank. A lot of administration is involved in a secured loan, so do not expect an overnight turnaround once you have an agreement in principle.
Thankfully, there are ways that you can speed up the process of taking out a secured loan. While this is not a decision to rush, once you have made your choice, get your ducks in a row and work with a reputable broker to complete your application in a timely manner.
What is a secured loan?
A secured loan is a type of loan that is secured against an asset, usually a property. Most borrowers use their homes to obtain a secured loan.
Secured loans are very popular with borrowers as they come with lower interest rates, higher loan amounts and more relaxed lending criteria than unsecured loans.
Secured loans should not be taken out lightly, as you are placing your property at risk. If you struggle to keep up with the repayments on a secured loan, the lender could potentially repossess your property.
Many lenders consider this line of borrowing lower risk than an unsecured loan thanks to the aforementioned collateral, so poor credit history is likelier to be overlooked. You may receive a lower interest rate than you would for an unsecured loan, and you can borrow up to 95% of the equity in your home.
If you are interested in taking out a secured loan, you should use a broker to get the best possible interest rate for your circumstances.
How long does it take to get a secured loan?
It can take up to four weeks to complete a secured loan application and receive your funds, though this timeframe can be reduced to as little as 1 week in some circumstances. The process for the application breaks down as follows.
- You check with your mortgage lender that you will be able to take out a secured loan against your property – your lender must give consent to a second charge.
- You locate a secured loan broker to act for you on the application.
- You discuss your needs with your broker – how much you are looking to borrow, over how long, and how much you can realistically afford in monthly repayments.
- Your broker investigates the best deals available for your circumstances, which will be based on your personal credit history and requirements, and feedback to you.
- You decide if you are happy to proceed with the loan application. If so, the broker will explain what documentation you need to supply the lender.
- The lender comes back to you with any queries about your documents.
- The lender conducts a valuation of your property to ensure their investment is protected.
- Contracts are prepared and signed.
Once you sign the contract and the loan is agreed upon, you will receive the funds within 24–48 hours.
How can I speed up my secured loan application?
The decision to take out a secured loan is not one to rush or take lightly. Once you have weighed up all the possibilities and decided that a secured loan is the best choice for your circumstances, you will understandably be keen to get your hands on your money.
While the process will always take as long as it takes, you can speed up your application by working with the secure loan lender to ensure all their needs are met.
Provide all required documents upfront
When a secured loan broker identifies the ideal lender for your circumstances, they will let you know what documentation you’ll require for your loan application. Common examples of this include:
- No less than three months of bank statements
- A copy of your most recent mortgage statement (or equivalent if you are securing the loan against a different asset)
- Three months of payslips or two to three years of tax returns if you are self-employed
- Credit card statements that show your most recent balances
- Proof of your identity, such as a passport or driver’s license
- Proof your address, such as a current utility bill
Once you are aware of the documents that your lender needs to proceed with your application, take the time to gather them up and submit them as soon as possible.
A secured loan application’s most important components are honesty and transparency. If you have a less-than-perfect credit history, you may consider glossing over some past issues or outright fudging numbers. Resist this temptation!
There is rarely any need to be anything less than honest when applying for a secured loan. The fact that you are putting an asset up as collateral is enough to make most lenders more forgiving of a questionable credit score, especially if you can offer a reasonable explanation for any black marks against your name.
The lender will check every element of your application with a fine-toothed comb. Any half-truths or omissions will be uncovered, and the application will be delayed as answers to queries are sought. If you fail to disclose historical problems, such as defaults or CCJs, you will be asked to explain them.
Consider the optics of withholding facts from the lender at the application stage, too. At best, you risk looking a little desperate or absent-minded – that doesn’t bode well when an underwriter considers if you are a credit risk worth taking. At worst, you risk being accused of fraud.
Fix any errors on your credit profile
It is always worth checking your credit report before applying for a secured loan. Source your latest report and go over it with your secured loan broker. If your score is lower than expected, you will find an explanation within this document.
You may find that the report is inaccurate. If you have a default against your name that should have lapsed, a registered CCJ that never came to pass, or something as simple as claims of late or missed payments that were actually made on time, contact the lender in question and ask them to update their records.
This may delay the process of applying for the loan. It can take a month for the error to be corrected and a new report to be issued. The cleaner your credit report, however, the fewer questions a lender will have – thus speeding up the process in the longer term.
Check that your current mortgage lender is happy for you to take out a second charge
If you are taking out a secured loan on your property, it’s not only your investment that’s at risk. If you still have payments outstanding on a mortgage, you will need the permission of your mortgage lender to place this debt against the home.
Your mortgage lender has the right to refuse you permission to take out a secured loan if they feel you will struggle to keep up with the repayments. If you are forced to sell your property to settle an unpaid secured loan debt, this impacts your mortgage lender too. Ensure this lender is happy for you to take out the loan, preparing evidence that you can meet your financial responsibilities.
What issues can slow down a secured loan application?
Once your application has been made, a lender will offer you an approximate timeline of how long the secured loan should take to complete. There are a handful of avoidable factors that can slow down the process, prolonging your wait for your money.
If a secured loan lender asks for documentation from you, they are not doing so out of love for administration. These documents will be essential to your application, ensuring the lender is compliant with responsibility regulations set out by the Financial Conduct Authority. Any delay in getting documents over to your lender will prolong the application.
Slow responses to lender requests
As the application process for a secured loan is quite complicated, your lender may have additional requests or queries as the cycle continues. Always be ready to reply quickly to phone calls or emails. The longer you make the lender wait, the further you are likely to slip down the priority queue as they deal with other clients.
The need for a physical valuation
If you take out a secured loan against your home, your application will be judged against the property’s value. If you are lucky, the lender will base the loan-to-value ratio of the loan on a desktop valuation.
This means that nobody will physically view the property, and the valuation will be conducted based on online research, such as previous sale prices and the market value of property in your area. A desktop valuation can be completed instantly.
If you disagree with the outcome of a desktop valuation, or the lender feels they cannot gauge an accurate value of your property without human interaction, you will need to wait for a physical valuation. This will delay the secured loan process as you need to wait for an appointment and written report in the aftermath.
A physical valuation means a professional surveyor will visit your property and assess it. If you have failed to disclose anything that may impact the value of your home, such as chronic damp problems or the growth of invasive Japanese knotweed, this will be uncovered during a physical valuation. As we pointed out previously, honesty is always the best policy!
Moving the goalposts
Circumstances sometimes change at short notice, and there is not always anything we can do about that. However, try not to move the goalposts on your loan once the application wheels are in motion. If you change your mind about how much you would like to borrow, the term of the loan, or how much you can afford to repay each month, you may need to restart the entire application from scratch.
This is why discussing your needs and expectations with a secured loan broker is always advisable before launching an application. A broker can explain all the terms and conditions associated with the loan agreement and help you decide the best approach in terms of how much to borrow and over how long.