How to Get Approved for a Secured Loan Faster and at a Lower Interest Rate
A secured loan application form gives the lender information about you and the property upon which to base a lending decision. If he verifies both of these items, you will qualify for a low-interest loan.
If neither you nor the property meets the A1 standard, however, you may still be able to secure a loan.
One advantage of secured loans is that they can be obtained even when conventional loan options are not.
Protected loans – You
When applying for a secured loan, you will be reduced to a number like most things in this day and age.
Those categories are:
o Work/self-employment situation
o The total amount of your current loan balances
o The amount of your monthly disposable income
o Your FICO Score
o Your behavior toward your current mortgage lender (and any previous lenders you’ve had in the past 12 months)
How to Make Yourself More Attractive to a Secured Loan Lender
Most lenders prefer not to collect all the information necessary to process a secured loan, so most fast loan applications are made through a broker. They would instead the broker pay for the extensive administrative costs of this procedure.
Rule 1: Collateralized Loans
Find a reliable, secured loan broker to help you out. I know the lenders of fast loans won’t like me stating this, but not every broker is created equal in their eyes. A higher percentage of their quick loans are approved, meaning they make more money per application from the better ones.
Using a reputable secured loan broker increases your chances of getting your loan disbursed (potentially at a lower rate). It reduces the broker’s fee, both of which benefit you directly.
Rule 2 for Guaranteed Loans
Cooperate with your dealer rather than fighting him. Providing documentation over and over is annoying, but it will be worth it in the end when your complete loan application is submitted to the secured loan provider.
Rule No. 3 for Guaranteed Loans
Talk to your broker about your available income and have him describe how the lender he places you with will be calculating it. Consolidating your debts could help you save money by lowering your interest rate.
If you’re self-employed but can show a history of consistent contract employment dating back several years, you might be able to negotiate a higher rate. Self-employed people who apply for secured loans often pay a higher interest rate because of the higher perceived risk they pose to lenders.
Rule 4 for Guaranteed Loans
When comparing protected loans to unsecured loans, your credit score is much less relevant (unsecured). But it’s still vital if you want a decent interest rate. Arrears are a red flag for lenders, especially those providing protected loans. By pulling your credit record, lenders can see how you’ve handled debt repayment over the past year. It will also detail any judgments or defaults from the district court.
It is possible to claim that a single month’s arrears on a secured loan are just a late payment, so that most lenders will ignore it. If you go over two months without paying, your rate will increase, so have a solid (preferably provable) reason ready.
Arrears still outstanding when applying for secured credit is a significant turnoff for lenders. If possible, maintain a low rate by keeping current obligations current at the time of application.
Rule 5: Collateralized Loans
Because the lenders of secured loans view themselves as an extension of your mortgage, they place greater weight on your payment history on your present mortgage than on your credit score when determining whether or not to grant you additional financing.
If possible, you should apply for a mortgage when you are not behind on payments; if this is not possible, you will need a compelling explanation to secure a lower interest rate.
You can speed up the application process by providing your mortgage lender with proof of the balance owed and payment history for the past 12 months.
Collateralized loans, or loans backed by the value of your property
The collateral for the loan is the property you own. If all goes wrong and you stop paying and communicating with the secured loan lender, he will repose your property (although he will not want to, as it creates another set of problems for them).
So, putting the above cautionary note aside, you are putting up your property as security for the loan. You are only doing this because it benefits you, and you probably fall into one of the following categories:
o A lower rate than other unsecured loans offer
o A larger loan than is available through other financial sources
o You want a loan, but your employment is questionable, or you are self-employed
o You have missed a few payments on some credit, and the loan rates you are being offered from other sources are unpalatable
o Your credit is poor, and you need to put up security to get a loan
It only makes sense that if you are putting your property up as security for your secured loan, then you may as well maximize its value and get a lower rate.
The secured loan LTV (loan to value) is one of the significant calculations that will affect the rate you are offered. It is simple to work out: you take your current outstanding mortgage, add to that the secured loan you are applying for, and divide it by the present value of your property. The lower the percentage, the better rate you should get.
So, if you want a lower rate, maximizing the property’s value is one of the best ways to go about it. It might take a little bit of time, but you could be paying for the secured loan for anything from 5 years to 25 years, so the extra bit of effort could save you a lot of money in the long term.
Secured loans – property rule 1
Toward the end of the application process for a secured loan, a valuer will likely visit your property.
The opinion of the valuers you have scheduled to visit is what matters most, as property valuation is not an exact science. Whether he spent the day in a traffic jam, argued with his kids, or forgot his anniversary is unknown to you, and there’s nothing you can do about it.
Friendly gestures like offering him coffee and setting aside time for him will go a long way. Explain the changes you’ve made and plans to make as you tour the property.
Knowing that improvements are planned for the property reduces the likelihood of a valuation dispute with the secured loan lender.
Second Property Rule for Secured Loans
Prepare your home to look its best for the appraiser. The difference between a well-kept and a rundown appearance can be thousands of dollars, so it’s worth the effort to make it look nice.
Make sure the foyer and main entryway are spotless, remove clutter to give the impression of more space, and wrap up any projects you may have started but never finished.
Third Property Rule for Secured Loans
As was previously mentioned, the property value is an opinion, so you should verify that the valuer has arrived at the correct figure. All valuers will contact real estate agents in the area to get a sense of comparable sales.
You should talk to real estate agents to learn about similar homes on the market and recent sales in the area. Then you can choose which items from your collection to show to the appraiser (or you can send them to your broker, but this is not quite as good as giving them to the valuer).
Human nature being what it is, your comparables will probably end up in the valuer’s file, and he will take these into account when valuing your property.
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