By Clare Yates
5 min read
A secured loan works a bit differently to other types of borrowing, with the loan usually secured against your home. However, lenders still tend to take a close look at your wider financial circumstances before approving anything.
That might sound intimidating initially, but knowing what they’re checking – and why – can make the process feel far more manageable.
Rather than focusing on just one or two things, like your credit score and income, lenders usually look at the bigger picture. Your property, how much equity you have and your incomings and outgoings all come into play. It’s about working out whether the loan is affordable and sustainable over time.
There’s no secret hack to guaranteeing approval, but a bit of preparation can help things run more smoothly and potentially boost your chances of getting approved. Understanding what lenders care about means you can spot potential issues early – and avoid surprises once you apply.
What do lenders actually look at when you apply?
When you apply for a secured loan, lenders don’t focus on just one thing. They’ll assess several areas together to build a full picture of risk and affordability.
The property: Lenders need to be comfortable that your home is suitable security for the loan. This usually means assessing the property type, its condition and its estimated value. Standard residential properties are generally easier to lend against than more unusual builds.
Available equity: If you are applying for a secured home loan such as a second charge mortgage, your equity will be an important factor. Equity is the difference between your property’s value and what you still owe on your mortgage. In simple terms, more equity usually means lower risk for the lender, which can influence how much they’re willing to lend and on what terms.
Affordability: Even with a secured loan, lenders still need to check that repayments look manageable. They’ll review your income alongside your regular outgoings to make sure the loan is affordable and sustainable over the long term.
Credit history: Your past borrowing behaviour helps lenders understand risk. While secured loans can sometimes be more flexible for people with previous credit issues, lenders will still look closely at how credit has been managed, particularly in recent years.
Existing financial commitments: Lenders also consider what debts you already have in place, such as other loans, credit cards or finance agreements. Higher monthly commitments can affect affordability calculations, even if you have plenty of equity.
Simple steps that may help your application
Having a rough idea of your property’s value before applying can be really helpful. It sets realistic expectations and makes it easier to understand what loan size might be achievable. Public data like recent sale prices can give a useful starting point.
It’s also worth checking your credit report early on. This lets you see what lenders are likely to see and gives you a chance to make improvements where possible, or spot any mistakes or outdated information that could cause confusion during an application. If you have existing credit cards, making the effort to reduce your borrowing to under 50% of your total available credit can help improve your credit score.
If you can reduce existing debts, that may help with affordability checks. Lenders look at your total monthly commitments, so lowering balances or clearing smaller debts can sometimes improve how affordable the loan appears.
Avoid making multiple credit applications in a short space of time, or taking out a new credit card or loan just before applying for a secured loan. Hard credit checks can leave a temporary mark on your file and may influence how lenders view your application.
Remember, many lenders now offer eligibility tools that use soft credit searches. These can give an indication of suitability before you apply without affecting your credit file. They’re not a guarantee, but they can help you avoid unnecessary full applications.
Are secured loans easier to get?
Secured loans can be more accessible for some borrowers because you’re offering your home, or another asset, as security. This reduces the lender’s risk, which means they may be more open to applications that may not meet the criteria for unsecured borrowing – particularly where credit history isn’t spotless.
This can be helpful if you’ve experienced credit problems in the past, such as missed payments or defaults. You might find that lenders are willing to focus more on your current financial situation, especially if your income is stable and you’ve managed your finances well more recently. That said, poor credit can still limit your choice of lenders and might result in higher interest rates.
It’s also important to remember that offering security doesn’t remove the need for affordability checks. Lenders will still assess your income, regular spending and existing debts to make sure repayments are realistic and sustainable over the long term.
So while a secured loan can open up additional options for people with imperfect credit, it isn’t a guaranteed route to approval. Lenders still need to be confident that you can comfortably repay what you borrow without putting your finances under strain.
Think carefully about securing other debts against your home. Your property may be repossessed if you don’t keep up the repayments.