Looking for a loan can be hard, especially with so many options out there. Secured loans are one option to consider, but are they easy to get?
In this blog, we’ll explain how they work, if they might be easier to qualify for than unsecured loans, and the risks to think about. If you’re considering this option or just want to learn more, this guide will help.
Are secured loans easy to get?
A secured loan uses a property you own as security (collateral). This means if you can’t repay the loan, the lender can take your property. Because of this, lenders are often more flexible with their criteria, making it easier for people with low credit scores, debt, or other financial problems to qualify.
However, approval is not guaranteed. Lenders still need to be confident that you can repay the loan. In addition, you also need to be sure you can make the repayments, as failing to do so could mean losing your property.
Is it easier to get a secured loan than an unsecured loan?
If you’re in a good financial position, getting either option may be straightforward. However, if you’ve had financial challenges or missed payments in the past, you might find it harder to get an unsecured loan.
Unsecured loans don’t require collateral, which reduces the risk for you but increases it for the lender. Without collateral, lenders can’t take your property if you fail to repay, so they tend to be stricter about who they approve.
So, it can be easier to get a secured loan in some situations, but it depends on your circumstances. Also, not everyone may want to secure a loan with their property, so it's important to think carefully before applying. Read our other blog on 'things to consider before applying for a secured loan' for more information.
How can I boost my chances of approval?
- Improve your credit score: While secured loans are available to people with low credit scores, having a better credit score can increase your chances of approval. It may also help you get better loan terms.
- Show stable income: Lenders want to know you can make regular repayments. So, you need to show proof of a stable income through pay slips, bank statements, or tax returns, to prove you can repay the loan.
- Provide a detailed loan application: Being clear and thorough in your application shows you’re reliable. Make sure to include all necessary documents and be ready to explain your financial situation. Discover what you might need to provide in our blog 'what documents are needed for a secured loan'.
- Consider a joint application: If your credit history or income isn’t strong, applying with a partner or family member may improve your chances. This gives the lender extra security and may help with affordability. However, the other applicant will need to contribute to household bills to qualify.
Summary
Secured loans can be a good option if you need funding, especially if you have had financial difficulties or a low credit score. By using your property as collateral it reduces the lender's risk, making it more likely they’ll approve your application. However, remember that approval is not guaranteed, and if you fail to repay, you could lose your property.
While they may be easier to get than unsecured loans for some people, it depends on your financial situation. Before applying, make sure you understand the risks and are confident in your ability to repay.
Loans are secured against property. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
