Calculating the Costs of a Secured Loan: What to Expect

Our secured loan calculator provides a helpful overview of typical borrowing costs incurred on a secured loan. As secured loan rates vary significantly from one lender to the next, we strongly suggest comparing the market in its entirety with the support 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 their home. An asset of sufficient value is used as insurance by the lender, who has the right to take ownership in the event of non-repayment.

For applicants with qualifying assets, secured loans can be easy to arrange, extremely cost-effective and less restrictive than conventional loans. As the balance of the loan is ‘secured’ with an asset of value, it is considered lower risk by the lender.

As a result, even those with poor credit or a history of bankruptcy can qualify for specialist secured loans.

Secured Loan Fees and Costs

When exploring the options using a secured loan calculator, you are provided with a basic overview of overall secured loan borrowing costs. Depending on your requirements and the lender you work with, any combination of the following fees and costs may apply:

1. Administration Fee

This is essentially another name for the ‘setup fee’ of the loan – i.e. the fee the lender charges for setting up the facility. It is a relatively standard upfront fee, which can be anything from 0% to 2% of the total value of the loan. Some lenders also charge fixed admin fees, irrespective of loan value.

• Lender Product Fee

The product fee is the lender’s arrangement fee, which can be paid upfront or, in most cases, added to the loan balance. Admin fees, product fees and arrangement fees all overlap to an extent, payable at around 1% though can be negotiated with broker support.

• Valuation Fee

You will need to prove to the lender that the asset you intend to secure the loan with is of sufficient value. This involves organising the services of a professional surveyor, paid for by the applicant. It is essential to ensure that the surveyor you hire is approved by the lender, otherwise they may not accept their valuation as accurate or viable.

• Broker Fees

Some independent brokers provide their services cost-free to the client, picking up their commissions from the lender, however, this is not applicable in all instances and many brokers attach a commission of anything from 0.5% to 2% of the total loan amount. This is something you must therefore clarify with your broker, prior to enlisting their support.

• Legal Fees

This encompasses all the additional costs incurred as a result of involving solicitors or legal experts of any kind. Should the services of solicitors be called for, either at your request or that of the lender, it is usually down to the borrower to cover the costs.

• Completion Fees

Lastly, be wary of lenders that charge unnecessarily elevated completion fees.  This is a fixed charge or a percentage-based commission payable at the end of the loan term, which depending on the size of the loan could be quite costly.