What is the process to get a loan? What do you need to do to get access to the finance you need?
There are more options than ever for British people wanting to borrow money.
Once just the preserve of banks and building societies, the last ten years has seen a revolution in the number of companies offering different types of loans to all sorts of people for all kinds of reasons.
Here’s CashLady’s quick guide to the process to get a loan.
The Process to get a loan. Sure you need a loan?
That’s the first question you need to ask yourself – do you really need this money? It’s never good to get yourself into debt so, if you do, make sure that you’re paying for something you need and not something you want.
Is there any money left in any savings account you have? Can you take an advance from your boss? Would your friends and family be able to help?
If you’ve exhausted those options and you still find yourself needing to plug a hole in your finances, looking for a loan is the next best place to go.
Decide how much you want to borrow
The next step in your process to get a loan is deciding the exact amount of money you want to borrow. Always make sure it’s enough because if you borrow money only to find out you need more a day or two later, it’s going to be very difficult to find another company to lend you more.
Make sure it’s not too much either. Remember that loans should only be used where there is no other option. A lot of people who have borrowed more than they needed in the past get themselves into difficulty because they spend the excess they borrowed and then have to pay it back.
If you want to borrow between £80 and £2,000, the companies most likely to want to lend you the money will be payday loan providers and short-term credit firms.
If it’s more than £2,000, you’d have more luck getting in touch with your bank, an online loan comparison site, a guarantor loan company or a logbook loan company.
Make sure you can afford the repayments
When you’re looking around, always make sure you get at least an indication of the amount of money you’ll have to pay back every month until the loan account is fully repaid.
Will that fit comfortably into your monthly budget? If it will, great – your loan will be affordable.
If it’s going to make living really difficult, extend the term of the loan to get your monthly repayments down. That will mean you’ll pay more for the credit over time but it will look great on your credit history when you make every repayment and you’ll still be able to enjoy life.
How quickly do you need the loan?
If you need the money very quickly, you’re more likely to get it fast from a payday loan or a short-term credit provider. But remember, these companies only really allow you to borrow between £80 and £2,000.
If you’re not in a hurry and you need more than £2,000, it would be worth trying the other routes mentioned in this article.
Apply directly to a lender
There are two ways you can apply for loans in the UK – direct to the lender or via a credit broker.
One of the reasons people worry about the process to get a loan is approaching lenders directly.
Every type of lender has a profile – a profile is the type of customers they feel most comfortable lending to. The problem is that not many lenders actually tell the public directly what their profile is so many borrowers apply blind.
It might be that you approach a lender who does a soft credit search on you and all looks good. A soft credit search will not leave a mark on your credit file. But, by law as part of responsible lending practices, if they say yes on a soft credit search, they may say no on a hard credit search. And that hard credit search leaves a trace in your credit file that other lenders can see.
Many people still choose to apply directly to a lender but others choose credit brokers, like CashLady. Why is that?
Choose a credit broker with great relationships with lenders
Loan brokers have been around for centuries. They’re like matchmakers. What their job is to do is to pair together the right borrower with the right lender.
Lenders share their profiles with credit brokers. The reason for that is that they don’t want a broker to send them dozens of applications for loans from people who don’t fit their profile.
When you apply through a broker, before the information goes off to a lender, the broker will check the details you’ve given and then match you with the lender likeliest to say yes. Because credit brokers do this every day, lenders are inclined to trust a broker’s judgement because they have built up a track record with the lender.
There are two types of broker. Both types receive fees when a loan is placed. One type gets paid that direct from the lender and the other type charges you a fee instead.
When applying through a broker, make sure you check any fees you might be liable to pay so there are no nasty surprises at the end.
CashLady believes that borrowers shouldn’t pay a fee. We receive a small thank you payment from a lender every time we match a borrower and the borrower agrees to take out the loan.
If you’re looking to borrow between £80 and £2,000, you’d like the money quickly, and you don’t want to pay a broker fee, click here to start your process to get a loan with CashLady.