It's easy to get confused when applying for a loan. However, if you're prepared, you can simplify the application process.
This article discusses:
Once you've picked the correct type of loan for you, ask yourself these two questions:
Next, you must determine whether you'll get accepted for the loan. You won't get acceptance if you ask for significantly more money than you can pay back.
Responsible lenders base acceptance on factors like your:
You need to consider your financial commitments like rent or mortgage repayments, household bills and other essentials like food and transport, plus any financial obligations you already have.
For example, aiming to pay back £10,000 in 12 months while earning an annual salary of £20,000 would likely be too difficult.
A loan provider will usually need the following:
They’ll then perform a hard credit check. You'll find out after applying whether you've been accepted, declined or referred for a further review.
Your lender will also ask you when you want your payments to start. After that, your lender will ask you to sign a credit agreement, which is the terms and conditions of your loan.
The agreement explains:
Read them carefully and ask yourself for a final time if this loan is right for you.
Repayments automatically start the following month from your agreement date.
It usually takes three to five working days. Your lender will send you correspondence and a copy of the agreement. These will confirm the funds and when your first payment starts.
There are a few ways to increase your chances when applying for a loan:
Remember: you can't rush this – it takes time. However, if you can, it's worth waiting if it means you'll get a better deal suited to you. We recommend reading our article on how to improve your credit score.
Picking the right loan can go a long way to ensuring you can pay it back. You want to avoid overborrowing, choosing one with high rates or using it on the wrong things.
Choosing the wrong loan can build up your debts, which leads to further problems.