Applying for a loan

A loan can help you spread costs over several months or years – whether you want to fund home improvements, buy a new car, or even consolidate debt. Applying for a loan is usually straightforward, but it pays to know what to expect and how to maximise your chances of approval. Also, there are some key things to consider before you commit to a loan.

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Should I apply for a loan?

Before deciding to apply for a loan, ask yourself if it's the right option for you. This may depend on your financial circumstances, your plans for the future, your credit score, what you're buying, and how much it will cost.

Here are some key things to think about:

  • What you can afford to borrow. It's crucial to make the monthly repayments on your loan on time and in full, otherwise you risk damaging your credit score and reducing your chances of getting credit in the future. Review you monthly income and expenses to see what you can afford, and consider how your financial commitments may change while you're paying off the loan.
  • The impact on your credit score. Each credit application you make leaves a hard credit search on your report, which can temporarily lower your credit score. Try to space out your credit applications over several months, and check your eligibility to help you only apply for credit you're likely to get.
  • Loan or credit card? When it comes to repayment schedules, loans tend to be more predictable, whereas credit cards usually offer more flexibility. The right option for you may depend on your financial situation and personal preferences.
  • Which type of loan? There are several different types of loans to choose from, including secured loans, personal loans and guarantor loans. You'll also need to decide what kind of rate you want (e.g. fixed or variable). Do some research to find out which one's right for you.
  • Comparing loans. It's important to compare loans from different lenders to find an offer that's right for you. Look carefully at the terms and features of each deal, as well as the APR (or APRC for secured loans).

How to apply for a loan

Once you've found the offer you want, you can usually apply for a loan online – either via Experian's website, or by going directly to the lender's website. Alternatively, you may be able to apply in person at one of the lender's branches. This may take longer, but it can be useful if you need help filling in the application form.

Credit application form questions

It's important to provide accurate and up-to-date information when applying for credit, so make sure you have relevant documents to hand when you apply.

Each company may ask slightly different questions, depending on their criteria for lending. They'll often ask about things like your:

  • Full name
  • Contact details
  • Date of birth
  • Current and previous addresses
  • Marital status (e.g. single, married)
  • Employment status (e.g. employed, unemployed, self-employed, retired)
  • Job title and employer
  • Salary and household income
  • Other financial commitments (e.g. mortgage, credit cards)
  • Living costs (e.g. for rent, council tax, food, bills, travel)

This information helps companies confirm your identity and understand your financial situation, so they can decide if it's a good idea to lend to you.

I've applied for a loan – what happens next?

When applying for a loan, the company will assess your creditworthiness using the information available to them. They'll typically consider:

  • Information from your credit report
  • Your application details
  • Any data the company already hold on you (e.g. if you're an existing customer)
  • The company's own criteria

Most companies use an automated process to work out your score, so you can sometimes get an answer within hours. You can get an idea of how lenders may see you by getting your free Experian Credit Score. This is a number between 0-999 – the higher it is, the better your chances of approval. And don't worry, checking your score won't affect it.

If you've been accepted, the lender will set out the terms of the loan, including the interest rate they're willing to offer you. If you're refused a loan by one lender, another may accept you, since each lender has different criteria. Just remember to space out your applications to avoid lowering your score. Also, try checking your eligibility before you apply again. You can see your eligibility rating for personal loans when you compare them with Experian.

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Just remember, we're a credit broker, not a lender. That means we don't provide credit, but we can help you find offers from a range of companies.

How long does it take for a loan to show up on your credit report?

Lenders provide us with information every four to six weeks. So if you’ve recently taken out a loan, it might not immediately show on your report.

How long does it take for a loan to go into your account?

It depends on several factors – such as the type of loan you’ve been approved for, the type of lender you’re using, and if you’ve been a customer of theirs before. Some lenders may be able to transfer you the money the same day, while others may take a week or more.

Here’s a rough guide on how long different loan payments can take to be approved. (But if you need accurate timings, it’s best to ask the lender when you can expect to receive the money).

  • Banks: If you’re an existing customer of the bank, you may receive the funds the same day you’re approved (and generally within two business days). But if you’re a new customer, expect to wait longer (between two to five business days is standard).
  • Online direct lenders: Online lenders sell themselves on their speed of service. They’ll often be able to send you the money the same day, or one business day after you’ve been approved.
  • Guarantor loans: These loans can take longer as there are two people involved (yourself and the guarantor). It can take anywhere between one business day to two 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 couple of weeks for the money to be paid into your account.

Can I apply for a loan with 'bad credit'?

It's possible to get a loan if you have a poor credit history. But bear in mind you may be offered a lower loan amount and higher rate, as this helps the company reduce the risk of you not paying them back. Also, applying for a loan may lower your score even more.

How can I improve my chances of getting a loan?

Improving your Experian Credit Score is a good way to boost your chances of getting approved for a loan – and at better rates.

Your score isn't set in stone. It's a living, breathing thing that changes with your financial behaviour. There are several steps you may be able to take to improve a poor credit score.

Alternatively, if you have little to no credit information (e.g. if you're a young person or new to the country), you may want to concentrate on building your credit history

Finally, try to apply for loans you're more likely to get. You can check your eligibility rating for personal loans when you compare loans with Experian.

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