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Published: 16/08/2021
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What to consider before applying for a loan

1. Can I afford it?

 This requires an honest appraisal of your current financial situation – including your income, outgoings and related credit commitments – to work out whether you can afford to add another monthly payment into your budget. 


2. Will my credit score come into it?

Your credit score will have a huge bearing on your loan application, both on the rate you’ll be offered and whether you’ll be accepted in the first place. You should check your credit score and find out how to improve it before you apply. 


3. Will I be eligible?

This depends on a number of different factors from your credit score to employment status, and given that all lenders have different criteria, there’s no guarantee that you’ll be accepted. That said, checking your eligibility in advance can give you an idea of whether or not you’ll be approved. 

Where can I find the best personal loans?

You’ll need to compare personal loans in order to find the best one for your needs. Our loan calculator is a great place to start.

How to apply for a loan

You can apply for a loan directly with a lender or bank or use a loans eligibility service. You may choose to apply for a loan with your existing bank. High street banks often offer their existing customer preferential loan rates, and it is usually easy to apply when already logged into your bank’s App or online banking platform. If you are confident of being accepted this can often be the most rate advantageous and convenient way to apply for a loan. Still make sure to compare loan rates before you commit and make sure you get the best deal.

If you are uncertain which lenders would accept you or your bank does not have a loans option, then a comparison or loans eligibility service could be a better choice. This type of service allows you to enter your details once and then have this reviewed by multiple lenders simultaneously.  The service will then confirm those lenders most likely to accept you for a loan – most of these will do this using what is called a soft scoring process, this means this application will not impact your credit score. 

Whichever way you decide to apply for a loan, once you are ready to apply you should get organised. Start by collecting all the information that a lender could ask to see, including your ID and personal details, address history, bank details, evidence of your income/outgoings and employment details. In some cases lenders can obtain identification electronically, but depending on the lender you may also need to provide these documents or copies as part of your application.

You will then need to complete the form on the lender’s website or by paper if you prefer and if available or complete the online eligibility form if using this type of service. The lender will then run a credit check and, if you’re approved, you’ll be sent the loan agreement. You need to read through this carefully, making sure to check the small print, so you know exactly what you’re agreeing to and the terms you’re being offered. Once you’re happy with everything you can sign it and send it back, usually either electronically or by post; if it’s the former, you may have the money in your account in a matter of hours. If you have applied for a loan with a guarantor you will also need to them to sign the necessary paperwork too.

How to apply for a loan online

Most lenders have an online presence and as such will allow online applications; typically you’ll need to click through from the relevant website and fill in the application form, with everything being handled electronically.

How to apply for a joint loan

You’ll need to check that your potential lender accepts joint applications and, if so, complete the application process with two sets of details rather than one.

How to apply for a low-interest loan

You’ll need to compare personal loan rates to find the best option available, though not everyone will have access to the advertised rate – this only has to be offered to 51% of applicants, and will always be reserved for those with the best credit ratings.

How to apply for a loan with bad credit

You can still apply for a loan with bad credit, though your options will be more limited and you can expect to pay higher interest rates, and in some instances you may be asked to provide a guarantor. Alternatively, homeowners may like to consider a secured loan, which can offer lower rates to borrowers with poor credit as they’re using their home as collateral.

How to apply for a student loan

Government-backed student loans must be applied for through official sources, however students seeking additional access to credit can often enjoy interest-free overdrafts on their student bank account.

How to apply for a business loan

Applying for a business loan can be more complex than for personal loans, with lenders expecting to see detailed business plans and evidence of profitability (either actual or potential). See how to go about it on our dedicated business loans page.

How to apply for a loan when self-employed

Business loans could again be an option for the self-employed, but so could standard personal or secured loans, depending on your situation. However, you may be expected to jump through a few more affordability hoops in your application.

How to apply for a bridging loan

In order to apply for a bridging loan you’ll need to provide detailed information about what you’ll be using the loan for, the property you’re looking to buy and any relevant details. Find out more on our bridging loans page.

What alternatives are there to a personal loan?

If you’re not sure you can commit to a personal loan but still need to access credit, a credit card may be a suitable alternative. You’ll still be subject to affordability checks but you’re not tied into making set repayments each month – though you’ll still be expected to pay a minimum amount – which can offer more flexibility. A 0% credit card could be ideal.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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