Calculating the costs of a secured loan: what to expect
Our secured loan calculator provides a useful overview of typical borrowing costs incurred on a secured loan. As the rates for secured loans vary widely from lender to lender, we strongly suggest that you compare the market as a whole with the help of a reputable broker.
What is a secured loan?
The term “secured loan” refers to any type of loan secured against the applicant’s assets, usually his home. Property of sufficient value is used as insurance by the lender, who has the right to own it in the event of non-repayment.
For applicants with eligible assets, secured loans can be easy to set up, extremely cost effective, and less burdensome than conventional loans. As the loan balance is “secured” by a valuable asset, it is considered less risky by the lender.
As a result, even those with poor credit or a history of bankruptcy may be eligible for specialized secured loans.
Guaranteed loan fees and costs
When you explore options using a secured loan calculator, you get a basic overview of the overall borrowing costs of secured loans. Depending on your needs and the lender you are working with, any combination of the following fees and costs may apply:
- Administration fees
This is basically another name for the “set-up fee” of the loan – that is, the fee that the lender charges for setting up the facility. These are relatively standard upfront fees, which can range from 0% to 2% of the total loan value. Some lenders also charge a fixed administration fee, regardless of the value of the loan.
Product fees are the lender’s arrangement fee, which can be prepaid or, in most cases, added to the loan balance. The Administration Fee, Product Fee, and Arrangement Fee all overlap to some extent, payable at approximately 1%, but can be negotiated with broker assistance.
You will need to prove to the lender that the asset with which you intend to secure the loan is of sufficient value. This involves arranging the services of a professional surveyor, paid for by the applicant. It is essential to make sure that the surveyor you hire is approved by the lender, otherwise they might not accept their assessment as accurate or viable.
Some independent brokers provide their services to the client for free, recovering their commissions from the lender, however, this does not apply in all cases and many brokers attach a commission ranging from 0.5% to 2% of the total amount of the loan. ready. So this is something you should clarify with your broker, before seeking their support.
This includes all additional costs incurred as a result of the intervention of lawyers or legal experts of any kind. If the services of a notary are used, whether at your request or that of the lender, it is generally up to the borrower to cover the costs.
Finally, beware of lenders who charge unnecessarily high completion fees. This is either a fixed fee or a percentage-based commission payable at the end of the loan term, which depending on the size of the loan could be quite expensive.