Here you’ll find a wide range of guides, offering money management tips and the latest financial news! Learn more with One Stop Money Shop

What Does it Mean To Have a Loan in Underwriting?

A loan is in underwriting when it reaches the final stages of the application and the company is making a decision whether to fund the loan or not. This process can take anywhere from a few hours to a few days depending on the type of loan or product.

For online payday loans, underwriting can be automated or if done manually by an ‘underwriter’ it may only take a few minutes. For more sophisticated products like mortgage or business loans where there is a lot of security and assets at stake, the underwriting process can take longer.

What happens during underwriting?

During underwriting, the lender is looking at the individual’s loan application and taking a number of factors into account which will determine their eligibility for a loan including:

  • Age
  • Location
  • Form of residence
  • Income
  • Employment
  • Credit score
  • Loan amount
  • Loan duration
  • Additional docs such as pay-slips and bank statements
  • History with the lender
  • Phone calls with the customer

Credit checks

Credit checks are usually carried out once the loan application has been completed. This gives the lender an idea of how well the customer has repaid other forms of debt in the past and how much they have outstanding.

Finding a customer with a good credit history gives the lender confidence that they will be more likely to repay their loan on time. However, if the lender sees some recent defaults and missed repayment, the individual might be looking for a bad credit lender and this could come with risks of the individual not making payments on time. This process is usually automated and carried out as soon as the individual applies.

Affordability checks

Affordability checks are a key part of underwriting which aims to see if the customer can afford the loan or not. Will it put them into greater financial difficulty or stretch them financially?

The lender will be looking at factors such as their income and outgoings and how much they have requested to borrow. Being able to match the amount they have asked to borrow with what they can afford is key to running effective affordability checks.

Who are the underwriters?

Loan companies can have dedicated staff underwriters, or these can be customer service people. It is usually something that is learnt on the job and can come with years of experience. Good underwriters are able to assess risk effectively, aligned with the company’s goals and also identify patterns of behaviour that will get customers to repay on time.

What is the result?

When it comes to loan underwriting, the answer is usually yes (funded) or no (declined).

In addition, underwriters may adjust the terms of the loan, such as changing the amount they have asked to borrow or duration of the loan.

In some cases, the underwriter may request more information such as:

  • Phone call to ask additional questions
  • Pay-slip
  • Bank statement
  • Utility bill

Is there anything else I can do?

If you are a customer and your loan is in underwriting, there is nothing to do and you simply need to wait to hear back from the lender. If you do not hear after several days, of course, you can follow up.

It is not recommended to apply for other loans in the meantime, because this will be seen by the initial lender when running a credit check and this could harm your application.

If the lender requests more information, you can be on hand to provide this. So making yourself available by phone and email is useful and if you are looking for fast funds, maybe having a copy of your payslip or bank statement on standby can be convenient.

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What to Consider Before You Apply

At The One Stop Money Shop, we encourage applicants to take their time when applying and make sure that they understand everything key about the loans we offer. For any further questions, you can contact us directly or visit our FAQs page. Here are some of the key things to consider before you apply:

How much do you need to borrow? 

One of the most common things for most customers is trying to apply for the maximum amount possible, and our maximum allows you to borrow £1,000. However, it is important to estimate beforehand exactly how much you need to borrow, taking into consideration your emergency expense, outstanding bill or reason for needing a loan in the first place.

You will be paying interest on any amount that you borrow, so taking out the highest amount is not always the most cost effective. So it can be worth making a list of your expected income and expenses over the next few months and determining the right amount to borrow accordingly.

How long do you need to borrow for?

The One Stop Money Shop offers loans that are repaid over 6, 9 or 12 months, giving you the flexibility to choose and borrow over the loan duration that you need. Again, the longer your loan term, the more interest that you will be paying on your overall loan sum, so it is helpful to outline your income and expenses and decide how long you will need the loan for. It may be worth adding an extra month or two, to give you some extra breathing space in case another financial emergency pops up.

Even if you borrow for longer than necessary, you still have the option to repay early, at any point and there will not be any added fees for doing so. In fact, you may save money because less interest in accrued overall.

Do I meet the criteria? 

The criteria for applying for a loan with The One Stop Money Shop requires applicants to:

  • Be over 18 years of age
  • Full-time UK residents
  • Employed and earning a minimum of £500 per month
  • Valid debit or current account
  • No recent CCJs or IVAs
  • Able to afford monthly repayments

Can I afford it? 

Our repayment examples are designed to give you an indication of how much you will be paying for you loan and how long. In fact, you can use our calculator here to try different loan amounts and durations. Therefore, it is important to think about how you will be able to repay your loan and whether you can afford it. 

Representative Example: £500 loan repayable over 12 months £81.25 per month total amount payable £975.00. Representative 295.60% APR

Will you be using your income? Are you expecting a bonus from work? Will you require another loan to repay this one? You want to be in a position where you can afford to repay your loan and not fall behind on repayments – since this could incur late fees and damage your credit score. If you find that you need to borrow another loan to pay off your original one, this can lead to an unhealthy cycle of debt.

Implications of non-repayment? 

Understanding the consequences of missed repayments is vital if you find that you are unable to keep up with repayments.

Our dedicated team will always try to assist with you lower repayment plans or by helping you delay repayment, however, missed repayment can lead to added late fees and a negative impact to your credit score. The default fee charges will never exceed £15, since this is enforced by the Financial Conduct Authority.

If you find that you are not going to be able to make your next repayment, you should get in touch with our team at your earliest convenience.

Have you considered alternatives? 

Before applying for online finance or quick loans, it is always good to consider any other alternatives. This includes borrowing money from family and friends (since this is likely to be free of interest), selling old unwanted goods through online apps or car boot sales or using a credit union where interest rates are significantly lower.

The One Stop Money Shop is passionate about responsible lending and treating customers fairly and we encourage customers to avoid rushing into an online loan agreement and exploring all suitable options beforehand.

How Do Credit Checks Work?

what information the lenders see

The approval of our loans will typically be subject to a credit check and this will help determine your eligibility. Every individual in the UK receives a credit score and will have a credit file when they turn 18. When carrying out a credit check, the lender is able to review your file and get an indication of your financial history including past loans, credit cards, outstanding bills, current address and more.

If you have a bad credit history, this will likely impact your chances of approval. However, if you have a good credit history and strong record of past repayment, this will maximise your likelihood of being accepted.

The One Stop Money Shop carries out credit checks using Equifax to ensure that customers can afford to repay their loan without falling into financial difficulty. Carrying out credit checks is a requirement of the Financial Conduct Authority prior to funding every loan and is key to lending responsibly.

Accesses data from a credit reference agency 

 

Your credit file is held by the three main credit reference agencies in the UK of Experian, Equifax and Call Credit. Every time a lender conducts a credit check on your account, they are paying a small fee to one of the credit agencies in order to access this information. Some key information from credit reference agencies includes:

Updated in real-time: Your credit information is updated automatically and this is very important to other potential lenders. So if you are making numerous loan applications in a short space of time or have recently been funded for multiple payday loans, this information will be updated immediately and be made available by other prospective lenders who will use this information to make informed decisions. Naturally, if you have just been granted numerous short term loans and are continuing to make applications, future lenders may be hesitant.

Recent payments: Your information on recent payments will be recorded and is made accessible via credit reference agencies. So if you have made a recent repayment on time for a financial product, this will improve your credit score or keep it strong and healthy. Equally, if you have just missed a repayment and are in arrears, this information will be made available to future lenders.

Outstanding debts: Any future creditors will be able to see what outstanding debts you have available. It is very normal to have loans or credit cards open, especially mortgages, since these can last 10 or 25 years. It is the role of the direct payday lenders that you have applied with to determine your affordability and how much you can borrow without falling into default. Lenders might be cautious if you have a history of defaults, IVAs or CCJs – but some lenders including The One Stop Money Shop are willing to take a view – see CCJ Loans for more information.

How lenders use your credit information 

Lenders will look at your information and determine if you are eligible for a loan. From their perspective, they want an indication as to whether you will be able to repay on time and the lender can make back their investment. The One Stop Money Shop will use a credit check to confirm:

  • Your eligibility
  • The amount you can borrow
  • How long you can borrow for
  • Interest rate and potential risk of default

Credit checks leaves a footprint 

When you apply for a financial product such as a loan or credit card and a credit check has been run, it will leave something on your file known as a search footprint. This is a like a mark or stamp on your file to confirm that someone has looked at your file.

 

It is important because having too many search footprints within a short space of time can make you look financially stretched or desperate for cash – or equally a potential victim of fraud if someone is applying for finance in your name. It is normal to have around 12 search footprints at any time and they will usually disappear automatically from your file after 12 months.

Some financial products and eligibility checkers will use something called a ‘soft credit search’ and this means that it checks your file and disappears immediately after. This is commonly used by brokers and loan matching tools where there is no obligation.

Check your credit file 

You can see who has run a credit check on your file by accessing your credit report. This is available for you to see when you sign up to a service provided by the likes of Noddle, Experian or ClearScore. There are usually free trials available and thereafter it costs a few pounds per month. Checking your file regularly can be useful if you have been a victim of fraud and want to keep on top of things or you are proactively trying to improve your credit rating and want to monitor the score regularly. You can also receive a one-off statutory credit report for £2 via the government.

Improve your credit score 

If you are worried that a credit check will show a history of missed repayments, you can do some essential things to improve your credit score. If you are young and starting out in the world of personal finance, you should join the electoral register which is free and this will confirm your address with the local authorities, something that adds credibility to your credit profile. You should also consider closing down any credit cards and store cards that you do not use and trying to get into the habit of repaying any debts, bills and loan repayments on time each month. Read our guide here on how to improve your credit score.

How Do Repayments Work?

The One Stop Money Shop offers instalment loans, repaid over 6,9 or 12 months. Our repayment schedule is designed to be flexible, allowing customers to choose how long they want to borrow for and giving them the option to repay early at any point. Our guide below explains how our repayments work and for any further questions, please contact us at [email protected]

  • Select your repayment date
  • Repay in equal monthly instalment loans
  • Collected via continuous payment authority
  • Repay early with no added fees

Select your repayment date 

When applying, customers can choose which day of the month they would like to repay, with most choosing the last working day of the month because this is when they get paid from work and are likely to have money available in their account. Some other customers prefer to set their repayment date for the day just after their pay date, giving them some extra time to organise their finances and pay off other bills beforehand.

We can accommodate customers with all different repayment dates including the 15th or 25th of the month or those that get paid on a four-weekly cycle. Either way, it must be convenient and practical for you.

You may also change your repayment date at any time during the loan term, provided that you do not have several payments outstanding. Our customer care team will be able to assist you by emailing us or calling us on 01924 377771.

Repay in equal monthly instalments 

All repayments with The One Stop Money Shop are collected in equal monthly instalments. So whether your loan lasts 6 or 12 months, you will know exactly how much you are repaying each month and this information will be presented to you in writing and signed in your loan agreement.

As a regulated payday loans direct lender, we understand that our loans are best suited for emergency purposes. By providing a repayment solution that is straightforward and the same every month, it allows the customer to arrange their finances and budget effectively.

£500 loan repayable over 12 months £81.25 per month total amount payable £975.00
Representative 295.60% APR

Loan amount £500 over 12 Months:

Interest Repayment
Month 1£81.25
Month 2£81.25
Month 3£81.25
Month 4£81.25
Month 5£81.25
Month 6£81.25
Month 7£81.25
Month 8£81.25
Month 9£81.25
Month 10£81.25
Month 11£81.25
Month 12£81.25
Total Interest£475.00
Total Repay£975.00

Repayment reminders 

Our team will send you repayment reminders on the days leading up to each monthly instalment. You will receive a text message and/or email address confirming the amount we will be collecting and on what date. This aims to provide transparency and ensures that there are no surprises when money has been collected from your account.

Collected via continuous payment authority 

All repayments are collected by our system using a process called continuous payment authority. This is a system that sets up ‘recurring repayments’ similar to a direct debit. The idea is that we can collect the same amount from your debit or current account every month, at a scheduled time, and you do not have to lift a finger.

All you need to do is make sure that there are sufficient funds in your account available for collection. However, there is no need to call us up to make a manual repayment, go to the bank, make payment over the phone or send money via the post – as this is all taken care of via our system. For more information, read here about continuous payment authority.

Repay early and no early fees 

Although we offer 6 months, 9 month loans and 12 month products, if you find that you are in a position to repay your loan early, you can do so at any point. You simply need to call up our team or email us to confirm and we will be able to take the full repayment. We do not charge any early repayment fees or exit fees (unless your loan is only open for one month) – so overall you could save money on the interest accrued by repaying your loan early.

Other FAQs 

Can I repay by cash or cheque?  

All payments are taken via a debit or current account. In some cases, we may accept cheques as a form of repayment, but we do not accept cash.

Can I repay by credit card? 

No, we do not allow customers to repay their loans using a credit card. This is because it is like using one form of debt to repay another and can lead to a spiral of debt. 

What happens if I miss repayment? 

If you miss a repayment, you will be contacted by our customer care team who will try to assist you. If you are up to 3 days late, there will not be any added fees. However, if you are unable to repay there may a default fee that is applied but this will never exceed more than £15. Where possible, we will try assist you with forbearance, offering extended payment dates, flexible repayment plans and other ways to help you get your finances back on track. 

Can someone repay on my behalf? 

In very rare circumstances we may allow someone else to repay your loan off on your behalf. This is if you find that are in a position and cannot repay your loan and all other methods of payment plans have been exhausted. We offer a no guarantor product, so loans are not usually paid off by another individual.

What is APR and How Does It Work?

APR stands for the ‘Annual Percentage Rate’ and is the simplest way to measure the cost of financial products and compare them effectively. With all types of loans, credit cards and mortgages across the UK and the world using APR as their yardstick, one can determine the cost of the product and make informed decisions over its price.

As an ‘Annual’ Percentage Rate, it refers to how much the loan or product would cost if taken out for an entire year. So for loan that only last a few weeks, it is typically compounded until it reaches the APR figure.

As the online loans industry is regulated by the Financial Conduct Authority, it is essential that every lender, including The One Stop Money Shop, clearly presents the APR and cost of a loan to every customer that applies.

Why is the APR for payday loans so high? 

Payday loans and other high cost products are commonly criticised for having APRs of 1,000% or more. The reason for such a high number is because the average loan only lasts a few weeks or months and when compounded to become an annual rate, it will tend to run in the hundreds or thousands of percent. (source)

For this reason, it is worth using other cost indicators when comparing payday loans such as looking at the cost of borrowing £100, which is capped to £24 per £100 borrowed, and the daily interest rate, which is capped at 0.8% per day.

The One Stop Money Shop offers an alternative to payday loans, where customers can choose to borrow over 6 or 12 month loans and our representative APR is 295.60% APR.

What is representative APR? 

The representative APR is when the rate (or a lower rate) is given to at least 51% of successful candidates that are approved. You may see loan products are regularly advertised as ‘representative’ and this means that more often than not, this will be the rate that is provided.

However, every individual applicant is different and their loan will vary based on loan amount, duration, credit history and affordability, so even if they wish to borrow £1000, it is common that the representative APR will vary slightly. 

What is typical APR? 

The typical APR means that this is the rate given to at least 66% of successful loan candidates, whereby two out of three customers will get this rate.

Fixed vs variable APR  

APRs will come in the form of either fixed or variable. When fixed, it means that the rate charges will remain the same during the entire loan duration – so you know exactly how much you are paying each month and there are no changes. This is very common for personal and instalment loans.

When the APR is variable, it means that it is subject to change and go up or down during the loan duration. So if you have the loan open for 12 months or 36 months, the rate you pay each month may go up or down depending on market changes. This is less common for short term finance, but very common for mortgages which are usually taken out at a fixed or variable rate.

For some people, they prefer knowing exactly what they are paying each month and can budget accordingly. Hence, the fixed option is a good fit. For others that accept a variable rate, they consider that the rates could go down and they could make a saving as a result.

Why was I not given the APR advertised? 

Every customer is different and there are various factors that could change the rate they receive, and therefore they do not get the rate advertised. As explained below:

Credit rating: Those with good credit ratings are typically able to receive better rates on their loans (and credit cards). This is because they are deemed a lower risk of default and the lender rewards this accordingly with a lower rate. However, for those with a bad credit rating or history of missed payment, there is a greater risk to the lender that the customer might default. With this in mind, the lender may charge a higher APR, different to the one advertised, to overcome this potential risk.

Loan term: As mentioned, APR is based on an annual calculation, so those with shorter loan terms might see higher APRs because the cost of the loan is compounded until it makes up one year. So if you opt for a shorter term product, you could expect a higher APR. 

Affordability: Some customers will have different monthly income and expenditure and to manage this effectively, some lenders may charge higher or lower rates to mitigate their risk.

How to Improve Your Credit Score

Your credit score is a numerical value (usually from 0 to 999) and is used by loan providers and credit companies to determine whether you will be eligible for credit. Your credit score is something that you get automatically in the UK when you turn 18 and is supposed to evaluate your ‘creditworthiness’ and likelihood of repayment.

When a lender is processing your loan application, they will typically run a credit check by accessing your score through one of the main credit reference agencies of Experian, Equifax and Call Credit. At The One Stop Money Shop, we work with Equifax to run our data checks.

How a credit score works 

A credit score is a number formulated on how well you have paid other forms of credit in the past such as credit cards, personal loans, payday loans and other factors too.

Credit scores from Experian can be broken down into five categories; very poor (0 – 560), poor (561 – 720), fair (721 – 880), good (881 – 960) and excellent (961 – 999).

The more loans that you repay on time, the higher your credit score will be. But if you fail to repay your loans and other debts on time, you will have a lower credit score.

Your score can constantly go up and down based on how well you repay your debts. So if you have a bad credit score, this can always improve. But if you have a good credit score, you will need to keep repaying on time to maintain your high score.

Credit score is key to approval

Those individuals with higher credit scores tend to have a better chance of approval for financial products, such as loans. This is because they are deemed a lower risk by the lender and there is a better probability of the customer paying on time. This is not always the case, however, since someone could have a good credit score but still have a lot of loans open or debt outstanding – and this is where good underwriting comes into place.

If you have a bad credit rating, you are less likely to be approved for mainstreams loans and financial products. Your eligibility will usually require additional security such as having a guarantor, putting down something as collateral or paying a significantly higher interest rate to mitigate the risk of default. Since your credit score is so important, we explain how you can improve it below and why it is relevant to applying for loans too.

Check your credit file 

Firstly, let’s understand what your current score is and what scope there is for improvement. To access your score, there are 14-day free trials available from the likes of Experian, ClearScore and Noddle so that you can log in, see your score and see what factors are impacting it. The Government also offer a £2 statutory credit report, that allows you to see your current credit file and score.

Beyond this, if you are passionate about improving your credit score, you should continue to check it regularly. Each time you make a repayment on time or pay off a credit card debt, you should monitor your score closely to see how you are improving.

Join the electoral roll 

By registering to vote with your local authorities, you are confirming your name, age and address and this is considering a good trust signal. For potential creditors, it gives peace of mind knowing that you are a real person and with a real residence. You do not necessary have to vote in the upcoming elections if you do not want to, but it is a good place to start building your score. You can join the electoral register here.

What is the effect of this? 

Joining the electoral roll will not magically turn a bad credit score into a good one. However, it is a good thing to have if you are serious about your financial prospects and particularly for young people who are starting fresh with no credit score, it can be a good starting point.

Avoid making too many loan applications 

For those actively looking for short term loans, they might consider making numerous application online with different lenders, in an attempt to improve their chances of approval. However, this comes with caution, since making too many applications in a short space of time can send a warning to potential lenders of someone that is financially stretched and desperate for finance. This is shown on your credit file by ‘search footprints’ which are recorded every time a lender or provider runs a credit check on you. So having too many search footprints in short space of time, is not advisable.

What is the effect of this?

By having too many search footprints, you can seem unattractive to most lenders. It is normal to have around 12 search footprints at any time, but any more is deemed excessive. You should try avoid using online loan brokers because this could trigger multiple searches at once. Either way, credit searches will disappear from your file will after 12 months.

Remove any credit cards and store cards you do not use 

It is very easy to sign up to new credit cards and store cards from our favourite retailers and supermarket chains. However, having too many credit cards means that you potentially have access to thousands of pounds, which you may or may not use. For most lenders, they are likely to be more cautious if you have numerous cards open, because the repayment of these cards could be prioritised over their loan instead – and someone who has access to an extra £10,000 could have too many outgoings to repay their short term loan on time.

What is the effect of this?

Removing any unused credit cards or store cards will have a positive effect on your credit rating. However, you must not just cut up the card, you will need to contact the provider and physically close the account.

Disassociate from people with bad credit

We may regularly set up joint accounts with parents, siblings or spouses – whether it is current accounts or mortgages. But having a joint account with someone with bad credit, does not look favourably on you. The notion of a joint account assumes that you share financial responsibility or are willing to help your partner if they fall behind on repayments. This can achieve to lower your credit score or impact your chances of approval for mainstream finance.

What effect does this have?

Being associated with someone with a very bad credit history, IVAs or CCJs can have a negative impact on your own credit rating by being guilty of association. Removing yourself from any joint financial obligations will achieve to better your score and financial position significantly.

Rebuilder credit cards and products 

For this with bad credit histories, you can use rebuilder cards to improve your score. This is where you use a credit card and borrow a small amount, at a high interest rate, and get into the rhythm of paying it off on time. Every time you make a payment as scheduled, the information is fed back to one of the credit reference agencies and updates that you are good at making payments.

What effect does it have?  

Using rebuilder credit cards can successfully build up your credit score. Over time, you will need to keep making payments on time for other financial products. But this approach can effectively take a bad credit rating and make it an average or good credit score over several months or years.

Pay bills on time 

Leaving the most important until last, individuals are encouraged to repay any outstanding bills on time. This includes credit card repayments, loans, mobile phone bills, utility bills and not paying your car finance can impact your credit too. Every time you are repaying a debt on-time, you are either improving or maintaining your credit score and also saving money too, but not paying any late fees, default charges or having to pay more for credit in the future.

If you are ever behind on your payments, try speak to the provider beforehand and explain your situation. If you are a good customer, they will be able to assist with lower payments, payment holidays or reduce any late fees.

What effect does this have?

Making repayments on time is the most important thing you can do to boost your credit score. It demonstrates trust and an ability to make payments on time, and this is exactly what your credit score aims to determine.

To conclude, if you can follow the tips outlined by The One Stop Money Shop and prioritise regularly checking your credit file and keeping up with repayments, you will be on track to having a strong credit rating and a life of sound financial freedom.