A loan will help you spread prices over a number of months or years – whether you wish to fund home enhancements, purchase a brand new car, and even consolidate debt.
Applying for a loan is often simple, but it surely pays to know what to expect and learn how to maximize your possibilities of approval.
Additionally, there are some key issues to consider before you commit to a loan.
Should I apply for a loan?
Before deciding to apply for a loan, ask your self if it is the right choice for you.
This will rely on your financial circumstances, your plans for the longer term, your credit score, what you are shopping for, and how much it’s going to cost.
Listed below are some key things to consider:
- What you can afford to borrow. It is essential to make the monthly repayments in your loan on time and in full, in any other case you risk damaging your credit score rating and decreasing your possibilities of getting credit sooner or later.
Review you month-to-month income and bills to see what you possibly can afford, and think about how your financial commitments could change when you’re paying off the loan.
- The impact in your credit score. Every credit application you make leaves a hard credit search in your report, which may briefly decrease your credit score.
Try to space out your credit purposes over a many months, and verify your eligibility to help you only apply for credit you are more likely to get.
- Loan or credit card? In the case of repayment schedules, loans are usually more predictable, whereas credit cards often supply more flexibility.
The right choice for you might rely on your financial situation and private preferences.
- What kind of loan? There are a number of several types of loans to select from, together with secured loans, personal loans and guarantor loans.
You will additionally have to decide what sort of rate you want (e.g. fixed or variable). Do a little research to find out which one’s best for you.
- Comparing loans. It is necessary to compare loans from totally different lenders to find a suggestion that is best for you.
Look carefully on the terms and features of every deal, in addition to the APR (or APRC for secured loans).
Find out how to apply for a loan
As soon as you have found out the offer you need, you’ll then be able to usually apply for a loan online.
Alternatively, you could possibly apply in person at one of many lender’s branches. This will take longer, however it may be helpful if you happen to need help filling within the application form.
Credit application form
It is necessary to provide correct and up-to-date info when applying for credit, so be sure to have related documents to hand once you apply.
Every company could ask slightly different questions, relying on their standards for lending. They’re going to usually ask about things like your:
- Full name
- Contact details
- Date of birth
- Current and former addresses
- Marital status (e.g. single, married)
- Employment info (e.g. employed, unemployed, self-employed, retired)
- Job title and employer
- Salary and family earnings
- Different financial commitments (e.g. mortgage, bank cards)
- Living prices (e.g. for rent, council tax, meals, bills, travel)
This info helps companies confirm your identity and perceive your financial scenario, to allow them to resolve if it is a good idea to lend to you.
You’ve applied for a loan – what next?
When applying for a loan, the company will assess your creditworthiness using the data available to them. They’re going to typically consider:
- Information from your credit report
- Your application particulars
- Any data the corporate already maintain on you (e.g. if you’re an existing customer)
- The company’s personal standards
Most firms use an automatic process to work out your rating, so you possibly can sometimes get an answer within hours.
It is a number between 0-999 – the higher it is, the higher your possibilities of approval. And don’t worry, checking your score will not affect it.
When you’ve been accepted, the lender will set out the terms of the loan, together with the rate of interest they’re prepared to offer you.
In case you’re refused a loan by one lender, another could settle for you, since every lender has totally different standards. Simply keep in mind to space out your applications to keep away from lowering your score.
Also, do try checking your eligibility before you apply again. You may see your eligibility rating for personal loans once you’ve compare them.
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How long does it take for a loan to enter your account?
It depends on a number of factors – such as the kind of loan you’ve been approved for, the kind of lender you’re using, and if you’ve been their customer before.
Some lenders might be able to send you the cash the same day, whereas others could take a week or more.
- Banks: If you’re an existing customer of the bank, you might obtain the funds the same day you’re approved (and generally within two business days).
However if you’re a brand new customer, expect to wait longer (between 2 to 5 business days is normal).
- On-line lenders: On-line lenders exceed on their speed of service. They’ll usually be able to send you the cash the same day, or one business day after you’ve been approved.
- Guarantor loans: These loans could take longer as there are two people involved (yourself and the guarantor).
It can take anywhere between one business day to up to 2 weeks for the funds to land in your account.
- Credit unions: It varies from union to union, but it’s not unusual for it to take a few weeks for the money to be paid into your account.