How to Apply for a Secured Loan: 6 Tips for Success

Written By: Hannah O'Neill
Published: December 5, 2023

Applying for a secured loan can be tricky, especially if you’ve had credit problems in the past, but we’re here to help you do just that. Even if your credit score isn’t perfect, these tips from Believe Money, a specialist finance broker, will guide you through the process.

These tips will give you a clearer path to getting your loan application right. Let’s get started and show you how to increase your chances of getting a secured loan.

Understanding the basics of secured loans

Before diving into the tips, let’s quickly explore what a secured loan is and why it can be a suitable option for those with bad credit.

A secured loan is a type of loan where you borrow money against an asset you own, like a house or a car. This asset acts as security for the lender. Here’s why it’s relevant for anyone with bad credit:

  • Lower risk for lenders: Because there’s an asset involved, lenders see secured loans as less risky. This means they’re more likely to lend to someone with a less-than-perfect credit history.
  • Potentially lower interest rates: Secured loans often come with lower interest rates compared to unsecured loans (e.g. personal loans, credit card loans, student loans). This is because the lender has the added security of your asset.
  • Larger loan amounts: You can usually borrow more money with a secured loan. The amount you can borrow is typically based on the value of the asset you’re using as security.

Remember, while secured loans can be easier to get if you have bad credit, they also come with added risk, and that is – if you default on the loan repayments and you’ve used your house as security, you could lose your home.

That’s why it’s important to work with a trusted advisor like Believe Money, who can guide you through the process and help you make the best decision for your situation. But we’ll get to that in a bit. For now though…

6 tips for a successful secured loan application

The following practical steps are designed to enhance your loan application and improve your chances of approval. From managing your credit score to choosing the right lender and preparing your documentation, each tip brings you closer to securing the loan you need.

Tip 1: Assess your credit report

Before you apply for a secured loan, take time to understand your credit score. This number tells lenders how you’ve managed your finances in the past. You can check your credit score for free using websites like Experian or Equifax UK. Here’s what to do:

  • Get your credit report: Request your credit report from a credit reference agency. Look for any mistakes or unknown transactions. If you find errors, contact the agency to correct them.
  • Understand your score: Your report will show a score. The higher it is, the better your chances of getting approved for a loan. It also affects the interest rate you’ll be offered.
  • Spot areas for improvement: Check for any missed payments or debts you haven’t cleared. These can lower your score.

Knowing your credit score and what affects it is the first step towards improving it.

Tip 2: Improve your credit score

Improving your credit score is a crucial step in enhancing your eligibility for a secured loan, especially if you have a history of bad credit. Here are some practical ways to boost your score:

  • Pay bills on time: Consistently paying your bills on time can positively impact your credit score. Set up reminders or direct debits to ensure you never miss a payment.
  • Reduce existing debt: Try to pay down existing debts. Lowering your overall debt can improve your credit utilisation ratio, a key factor in your credit score.
  • Register on the electoral roll: If you’re not already registered, do so. Lenders use this information to verify your identity and address, which can influence your creditworthiness.
  • Limit credit applications: Each credit application can leave a mark on your credit report. Too many applications in a short period can be a red flag to lenders.
  • Check for joint accounts: If you have any joint financial products with someone who has poor credit, this could affect your score. Consider separating these accounts if necessary.
  • Build a credit history: If you have little or no credit history, consider getting a credit card or a small overdraft. Use it wisely and pay it off in full each month.

By following these steps and gradually improving your credit score, you can enhance your chances of securing a loan.

Tip 3: Choose the right asset as collateral

Selecting the appropriate asset to secure the loan against is crucial, especially when your credit history is not ideal. The right asset not only impacts the lender’s decision but can also affect your loan terms and financial risk:

  • Value of the asset: The asset’s value should ideally exceed the loan amount. This provides the lender with enough security and may result in more favourable loan terms, such as lower interest rates. Common assets include your home, your car, savings accounts etc.
  • Risk assessment: Think carefully about the risk. Your chosen asset is at risk if you default on the loan. Consider an asset that, while valuable, isn’t critical to your day-to-day life or business operations. For instance, using a second property instead of your primary home could be a wise choice.
  • Eligibility of assets: Not every asset can be used for security. Check with the lender to see what’s acceptable. Different lenders have varying criteria for what they will accept as security. Some prefer property due to its typically stable value, while others might accept more diverse assets. If you’re not sure, have a clear conversation with potential lenders to understand their requirements and restrictions.
  • Impact on loan terms: The type of asset you offer can significantly influence the terms of your loan. More valuable or stable assets can lead to higher loan amounts, longer repayment periods, and possibly lower interest rates. However, larger loans or longer terms can mean more interest paid over time, so balance the immediate benefit of favourable terms with the long-term cost.

Tip 4: Compare lenders and offers

Finding the right lender is as important as choosing the right loan. Especially if you’ve got bad credit, it’s crucial to compare different lenders to find the best terms. Here’s how to do it effectively:

  • Research a variety of lenders: Don’t just settle for the first lender you come across. Look at different types, including banks, credit unions, and online lenders. Each may have different criteria and offerings that could be more suitable for your situation.
  • Compare interest rates and fees: The interest rate is a key factor, but don’t overlook other fees and charges. Some lenders might offer a lower rate but have higher fees, which could cost more in the long run.
  • Read the small print: Understanding the terms and conditions is essential. Look for any clauses that could affect you, like early repayment fees or changes in interest rates over time.
  • Check for flexibility: Some lenders may offer more flexible repayment terms, which can be beneficial if your financial situation changes. Find out if there are options for payment holidays or adjustments to repayment amounts.
  • Customer service and support: The level of customer support can be important, especially if you encounter difficulties during the repayment period. Read reviews or ask for recommendations to gauge the lender’s reputation for customer service.
  • Consult a specialist broker: A broker like Believe Money can help you navigate the market, especially if you have bad credit. We have access to a range of lenders and can help find one that suits your specific needs.

Tip 5: Prepare your documentation

Having the right documentation ready is a key step in the loan application process. It helps lenders quickly assess your financial situation and make a decision. Here’s what you need to prepare:

  • Proof of identity and address: This typically includes a valid photo ID (like a passport or driver’s license) and a recent utility bill or bank statement as proof of address.
  • Income verification: While not necessarily a deal break for a secured loan, most lenders will want to see evidence of your income to assess your ability to repay the loan. This could be recent payslips, tax returns, or bank statements showing regular income.
  • Details of your asset: You’ll need to provide information about the asset you’re using as collateral to prove it’s yours, such as property deeds or vehicle registration documents.
  • Credit history: Although the lender will check your credit history, having your own recent credit report can be useful, especially if you want to discuss any points in it.
  • Bank statements: These give lenders an insight into your financial behaviour, spending patterns, and existing commitments. Some lenders may ask for a breakdown of your monthly expenses. This helps them understand your disposable income and how comfortably you can manage loan repayments.
  • Existing debt information: If you have any other debts, prepare details about them, including outstanding amounts and repayment terms.

Tip 6: Understand the terms and conditions

Take time to fully understand the terms and conditions of any loan agreement before you sign. This ensures you know exactly what you’re committing to and helps avoid any surprises down the line. Here’s what you should focus on:

  1. Interest rates and APR: Understand the interest rate and the Annual Percentage Rate (APR), which includes the interest rate plus any additional fees or costs associated with the loan.
  2. Repayment terms: Look at the loan’s repayment schedule. Understand how long you have to pay back the loan and what your monthly payments will be.
  3. Fees and charges: Be aware of any fees associated with the loan, such as arrangement fees, late payment fees, or charges for early repayment.
  4. The consequences of default: Understand what happens if you’re unable to make payments. This is crucial with secured loans, as the lender can take possession of your assets.
  5. Read the small print: Pay special attention to the small print in the agreement. If there’s anything you don’t understand, don’t hesitate to ask for clarification.
  6. Seek legal advice if necessary: If you’re unsure about any part of the agreement, consider seeking advice from a legal professional.
  7. Broker’s guidance: A broker like Believe Money can help you navigate and understand complex loan terms and ensure the agreement aligns with your expectations and financial capabilities.

Fully understanding the terms and conditions of your secured loan is vital. It not only helps you make an informed decision but also prepares you for managing the loan responsibly.

Tip 8: Consult a specialist broker

When looking for a secured loan, especially if you’ve got a bad credit history, working with a specialist finance broker can be a game changer. Here’s why consulting a broker like Believe Money can be so helpful:

Access to a wider range of lenders

Specialist brokers often have connections with a variety of lenders, including those who are not directly accessible to the general public. We can offer you more options that you might not find on your own.

Expertise in bad credit situations

Brokers like Believe Money have experience dealing with clients who have less-than-perfect credit histories. We understand the challenges and know which lenders are more likely to approve your application.

Tailored loan solutions

We can assess your specific financial situation and recommend loan options that are best suited to your needs, rather than a one-size-fits-all approach.

Help in improving loan terms

We can negotiate with lenders on your behalf to secure better interest rates, lower fees, or more favourable repayment terms than you might get if you approached lenders directly.

Guidance through the application process

We can assist you in preparing your loan application, ensuring all the necessary documentation is in order and presented in the best possible light.

Saving time and reducing stress

Searching for the right loan and comparing offers can be time-consuming and overwhelming. We can take on this legwork, allowing you to focus on other important aspects of your life.

Got a question about applying for a loan?

Applying for a secured loan, especially with a poor credit history, can seem complex, but it doesn’t have to be overwhelming. By following these tips and seeking the right guidance, you can navigate the process with greater confidence and success.

If you have any questions or need personalised advice on your loan application, don’t hesitate to reach out. Our team at Believe Money is here to help you every step of the way. Contact us today to discuss your options and start your journey toward securing the right loan for you.

About the Author

Hannah O'Neill

Hannah O'Neill

Hannah O'Neill is a leading financial expert with over 10 years of experience in credit and loans. She is helping people achieve their financial goals based in the United Kingdom. She has been featured in numerous media outlets. Her articles offer practical advice on how to improve your credit score, get the best possible loan rates, and manage your debt wisely.

We compare loans from our panel of the UK’s top lenders to get you the best deal.


Contact Us

Mon – Thursday 9am – 7:30pm

Friday 9am – 3pm

Call from a mobile or Landline:

01302 591 360