Loans are very useful to help pay for emergency purposes and to tide us over until we get paid from work. Whether it is a broken boiler, home improvement, paying rent or the bills mounting on the kitchen table, being able to borrow just a few hundred pounds can make a huge difference to keep our bank balance happy.
But applying for loans is not always that straightforward and sometimes people are declined despite being good candidates. The One Stop Money Shop has been operating in the UK loans sector since 2002 and we are pleased to offer some top tips to help you improve your chances of getting a loan.
A lot of factors are based around being a good person to lend to and that your payments will be made on time. So if you can give the lender confidence that you will repay on time, you will improve your chance of getting the loan that you need.
Use Your Own Details
Always use your own details when applying for a loan online, including:
- Contact numbers
- Income and employment details
Some applicants are tempted to use old addresses or those that belong to their families, but this is something that will be picked up when doing credit referencing. Being able to connect an individual to the correct address is something that adds a lot of trust and a good way to do this is to sign up for the electoral register which is free.
You should give your real phone number because the lender may need to call and ask a few follow up questions and also, if successful, you will be required to verify your loan agreement via an SMS code.
It is important to give the correct information to give credibility to your application, but it will also make your application smoother and get processed quicker.
Have a Regular Income and Employment
By having a stable employment and earning a regular wage, it means that you have money coming into your bank account each month and are in a position to afford your monthly repayments. Of course, your outgoings and expenses need to be lower than your income – but being employed and earning an income is a good start.
Those applicants that have been employed for many years and have proof of this offer a lot of confidence to the lender that they will be able to pay on time. Some lenders will request proof of employment through P60s, payslips and copies of recent bank statements.
Have a Fair or Good Credit Score
Most lenders in the UK will carry out some sort of credit score prior to approving your loan. This will give an indication of your credit history including how well you have paid other types of loans, credit cards and bills in the past. If you have a history of paying on time, the lender can be confident that you will pay their loan on time too.
However, if you have defaults, missed payments, arrangements, IVAs or CCJs, this will cause lenders to be more cautious and restrictive with whom them lend to. Finding a loan for bad credit histories can be tricky, unless you are using a guarantor or have some form of collateral (car, home, jewellery).
If you are improving your repayment history, making payments on time and your credit score is going up and up, this can be sufficient to help you get approved (you will also need to be employed). See direct lenders for bad credit for more information.
If you have a bad credit rating, there are some things you can do to improve it, including:
- Closing any store cards and credit cards that you do not use
- Disassociating from someone with bad credit that you have a joint account or mortgage with
- Join the electoral register
- Get into the habit of making loan or card repayments on time – use credit builder cards if need be
- Consolidate your debts and clear any outstanding payments
Avoid Making Too Many Loan Applications
If you making numerous loan applications in a short space of time, this can make your look financially desperate for cash. This can be a big warning sign to lenders that you are looking to borrow aggressively or beyond your means.
It is expected to make a handful of applications, but making dozens and dozens with different companies over a few days can be detrimental.
This information is viewed by every company that runs a credit checks on your account and lenders will access this information from agencies such as Experian, Callcredit and Equifax.
Make Yourself Available
To improve your chances of getting a loan, it is good to make yourself available for any follow up questions or queries from the lender.
If you meet the provisional approval, you will be required to electronically sign a loan agreement using your email address link and SMS code – so being on hand and near your phone and emails will help move things along.
In addition, some lenders may request additional proof of income or address and being available to answer and provide relevant documentation will maximise your chances of approval. To provide a copy of these documents, you can simply scan then onto your computer or take a clear photo with your smart phone and send them to the lender.
Either way, if you are applying for a loan during work hours, Monday to Friday, you should stay close to your phone and emails for any updates. If you make an application and then go do the grocery shopping or go to work, you will have to wait until you return.