Recent studies show more people are applying for loans, and the ongoing debt crisis in Europe is expected to push the cost of borrowing up for banks even further. However, many individuals are failing to get the loan they require, causing a lot of debt issues and money gaps that cause stress, anxiety and worry for millions of Brits.
Loan applications can be long winded and paperwork-fuelled, but with the right application and a good credit history, borrowers can receive the credit needed.
Many of us have heard that new lending rules make it harder to get a mortgage. The same applies for regular, traditional loans from banks, when you are borrowing anything from £1,000 up to £50,000. Banks seem less inclined to lend as easily as they used to. However, there are other options available when it comes to lending. You may have heard of loans from companies like Wonga, for instance. These companies may have a less stringent application process. You might also choose to take out a credit card to help you with payments. If you’re lucky, you could rely on friends and family to help you meet payments.
Why people are applying for loans
Top reasons for needing a loan include:
- To meet an unexpected payment
- To pay for a holiday, car or house improvements
- To pay other debts – like credit cards and for consolidation purposes
There are many ways that borrowers can make their applications more attractive when applying for a loan.
According to thisismoney.co.uk, checking your credit file is a number one priority. You can get a copy of your credit report for around £2 from credit reference agencies like Experian. You can then see what your lenders would see, i.e. how strong a position you would be in to both take out a loan and repay it on time.
As a first time borrower, you may find it difficult to take out a loan, seeing as there will be no credit history to speak of. Many younger borrowers find this frustrating as they cannot get a loan due to a squeaky-clean past. In this case, borrowers should prepare their credit files by taking out a low interest credit card, spending very little on it and meeting all repayments when necessary; this can help you to build up some kind of positive credit history.
Another option you might consider is applying for a larger amount of money. Borrowing a smaller amount could result in you having to pay a higher rate of interest in the long run, so check out lots of different rates. Currently, the most competitive ARP available (for a loan around £5,000) is 7.8% from Zopa or 7.9% from Sainsbury’s Finance. However, this is constantly changing so make sure you stay alert to new deals hitting the market.
Track All Your Accounts With Personal Capital
Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.A final tip would be to not apply for too many loans. Every loan you apply for leaves a footprint on a borrower’s credit file. Apply for one at a time, starting from your most preferred. If a rejection letter follows, you can always contact the company and ask what would have made your application more attractive – for the next time you apply.
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