Secured loans provide applicants with valuable assets at their disposal with access to significant sums of money at competitive rates of interest.
New data suggests that the number of people applying for secured loans in the UK has increased significantly over the past year, up by more than 30%; upwards of 2,000 secured applications are being processed and approved each month, as the UK discovers a more flexible and accessible way of covering major expenses.
Before applying for a secured loan, several important points must be considered carefully. Each of which could influence the affordability of the facility and your likelihood of qualifying with your chosen lender.
How much do you actually need to borrow?
Always remember that the more you borrow with any type of loan, the higher the overall borrowing costs. Even when taking out a secured loan with an APR of less than 3.5%, larger loans with longer repayment terms cost more. Working out exactly how much you need to borrow is therefore essential. Come up with a concrete figure and try to avoid the temptation to borrow more than you really need.
Can you comfortably afford the repayments?
Being able to comfortably afford repayments on a secured loan means considering all possible eventualities; is there a chance your primary source of income could be reduced or cut off for any reason? Do you still have plenty of money left after your monthly outgoings to sustain your lifestyle? Are you 100% confident that you will still be able to comfortably afford the repayments several years down the line?
Have you attempted to improve your credit score?
An imperfect credit score may not prevent you from qualifying for a secured loan. But this does not mean that an excellent credit score cannot pave the way for more competitive deals and an easier application process. If there is anything you can do to improve your credit score, do it before applying. This means taking a look at your credit score with the major UK credit agencies where you will find an extensive range of tips, tricks, and hacks to add at least a few points to your score.
Are you comfortable with the consequences of non-repayment?
No bank or lender ever wants to reach the point where repossession becomes necessary. Nevertheless, your assets are at risk if you fail to keep up with your contractual obligations. You, therefore, need to consider how comfortable you are with this, particularly if putting something as important as your home on the line. Decisions like these should not be made without carefully considering all possible outcomes – including the worst-case scenario.
