Monday, April 13, 2009

Applying for a Secured Loan in the UK

By Shaun Parker

There are some regulations that you have to meet if you want to apply for a secured loan in the UK. Some are very straight forward for example, you have to be a UK citizen and you have to own your own home. However some might not be as straight forward as you think.

Most people would be aware of these simple regulations however there are a few more that they might not be sure of. One of these would be your individual credit rating. Although it is possible to buy a copy of your credit rating most people don't.

This means that they are not sure of their credit rating until they get feedback from the secured loan company, however if you have a bad credit rating you might still be able to obtain a secured loan in the UK. Also remember that you have to give your consent if you want the lender of loan broker to perform a credit search.

The equity in your home is another factor that will effect your secured loan application. There will have to be an evaluation of your home before the loan can be issued, the main reason for this being that because the loan is secured on your home the lenders will want to make sure that the valuation has been verified by an expert.

The valuation your lending company offers is usually lower that you think, the reason for this being that the lending company have to protect themselves against movements in house prices and so they will not accept a big evaluation if house prices have risen sharply over the short term.

Some lending companies advertise that they can offer 125% of the property value. This might be possible in very extreme cases however the most is usually about 90% of the property value. This figure will take into account the amount of mortgage on the property and the amount of loan applied for.

When you apply for a secured loan UK and you are already aware of all the above points there can be a few more that might not be as clear. This is usually because they reflect the individual circumstances of the individual borrowing the money.

For example, if a person applied for a secured loan in the UK for 10,000 pounds. They might be a home-owner with equity on their property but their income might not cover the payments. These people might have other bills like credit cards, hire purchase agreements and when this is coupled with their new secured loan payment it will leave them with very little money to spend every month.

However the lender can offer to consolidate the hire purchase payments and all other bills into one monthly payment. This will mean that instead of 10,000 pounds secured loan you are now getting a 20,000 pounds secured loan with less payment every month. It can be strange that the lender cannot give you a 10,000 pounds secured loan but they can offer you a 20,000 pounds loan.

It is worth noting however that the reason the payment is lower is because your payments are spread over a longer time and will usually mean you will pay more back over the long term.

So to sum up, every single secured loan is as unique as the person applying for it. There is no such thing as one loan fits all. This is why comparison companies have been criticized in the past. These provide people with a small application form and then give them a quote with this limited information. This simplistic approach will not find the loan that is ideally suited to your needs, as lenders have to have all the information and be able to perform a credit search before they can make a proper offer.

Some people have complained that the offer they have been made by the comparison companies is a lot different than they ended up paying when the loan is complete. It is important to make sure that you have given your details accurately and the lending company can give you the best offer for your secured loan.


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