Additional eligibility checks have always applied to forms of secured lending; as secured loans are typically much higher in value than unsecured personal loans, it is prudent for the lender to perform all necessary eligibility checks.
But what specifically can you expect as a first-time secured loan applicant? Moreover, what can you do to speed up and simplify the application process, if anything?
Essential Eligibility and Affordability Checks
The lender issuing the secured loan needs to do everything necessary to ensure their capital is safe, when lending larger sums of money personal assurances and even an admirable financial history are not enough.
There needs to be concrete verification that irrespective of what happens, the lender will not be left out of pocket. In particular, it needs to be verified that the value of the asset the loan will be secured against is sufficient to cover all applicable costs.
These are the standard checks and forms of verification you can expect to undergo as part of your secured loan application:
- Proof of identity and residency in the United Kingdom
- A formal assessment and declaration of the asset’s value
- In-depth affordability assessment based on financial position
- Assessment of income and expenditure (personal or business)
- Detailed credit history checks and declaration of CCJs/bankruptcy
- Evidence of company financial performance and outlook (sometimes)
Eligibility checks vary significantly from one lender to the next in accordance with in-house lending policies, in some instances all affordability checks are rendered null and void if the value of the security provided by the applicant vastly exceeds that of the loan. Elsewhere, you will be expected to provide evidence of your current financial position and track-record in order to qualify.
If you have any questions or concerns regarding your eligibility for a secured loan, it should be discussed with an independent broker before applying.
Why Eligibility and Affordability Checks Are Necessary
In some instances, it may seem as if lenders are going to extremes with their in-depth eligibility checks. However, establishing eligibility and affordability is just as important from the borrower’s perspective as that of the lender.
Should something unforeseen occur at any time before the bridging loan is repaid, it could render the borrower unable to fulfil their agreement. In which case, they could lose ownership of their property; this is something all banks and lenders would prefer to avoid, as it begins a costly, complex and time-consuming repossession process.
Where eligibility checks seem excessive it is worth remembering that they exist for a reason, the fact that repossession rates remain lower than 1% indicate that the additional checks are working as intended.
Any questions or concerns regarding eligibility or affordability should be discussed in full with an independent broker. Experienced broker support also holds the key to getting the best possible deal on any type of secured loan.
For more information or to discuss the potential pros and cons of secured borrowing in more detail, contact a member of the team at UK Property Finance today.