Understand the purpose of a loan
A short-term loan is designed to act as a float in the event of an unexpected expense, such as a broken-down car or an unplanned bill, and you do not have the immediate funds to pay for the expense upfront.
You should not apply to borrow money if you don’t need to or if you know you would not be able to repay it.
Things to ask yourself before applying for a loan
1. Can I afford a loan? This is the most important question to ask yourself before making an application. You should never apply to borrow money that you can’t afford.
2. Do I need the money now or can this expense wait a couple of months until I’ve saved up?
3. Have I explored any possible loan alternatives? We’ll look into some alternatives to loans in the section below.
Alternatives to loans
A loan isn’t the right fit for every financial situation. If you’re unsure whether this type of borrowing is suitable for you, here are some loan alternatives that you may wish to consider.
- Use your savings – if you have any
Breaking into hard-earned savings to cover a necessity, such as a replacement boiler, can feel disheartening. However, if you have savings, you could consider using this instead of applying for credit. You’ll be charged interest on a loan, so borrowing could be the more expensive choice. - Borrow from a loved one
A friend or family member could be willing to lend you the money you need at a lower interest rate than that offered by an official lender.
If borrowing from a loved one is a possibility, it’s important to be transparent and agree on a repayment plan before any money exchanges hands. It’s a good idea to get your arrangement in writing so everyone knows where they stand. - Research credit cards
Some credit cards, such as a 0% purchase credit card, offer an introductory period of low or interest-free spending. Any balance that’s left on your credit card once the promotional period comes to an end will be charged interest at your standard rate.
You’ll need to do thorough research; like a loan, a credit card is a serious financial commitment.
Be aware of the risks
As with any financial product, there are risks involved when taking out a loan.
It’s extremely important to make your repayments in full and on time each month. A late or missed repayment could result in you being charged a fee by the lender. In addition to this, your credit score will be damaged.
If you have a record of defaulted repayments on your credit file, this will affect your credit score, and you could struggle to get credit in the future should you need it.
Work out how much money you need and can afford to repay
If you’re confident that a loan could be a suitable option for you, the first step is to work out how much money you need and can afford to repay.
Perhaps you have some savings you could put towards the expense, which will lower the amount you need to borrow, or maybe you need to apply for the full amount.
When working out whether the loan is affordable for you, remember that you’ll be charged interest, and this will be included in your monthly repayments.
As discussed, you should never apply to borrow more than you need or can afford to repay.
Only apply to borrow from authorised, regulated lenders
It’s important to make sure that the lender you choose is authorised and regulated by the Financial Conduct Authority (FCA). Authorised and regulated lenders will appear on the FCA register, which you can view here.
Take the time to shop around
Take the time to have a look at different loans and lenders before you decide whether to make an application.
When you apply for a loan directly with a lender, they will complete a creditworthiness assessment, which could include a hard search. Multiple hard searches in a short space of time will have a negative impact on your credit score.
Using a credit broker to help you find a suitable loan
Looking for a suitable loan can be time-consuming and confusing, and that’s why many borrowers prefer to use a credit broking service.
As well as saving you time, a credit broker could help to protect your credit score from multiple hard searches. A credit broker uses a soft search to scan a panel of lenders for a suitable loan for you.*
CashLady is a credit broker with access to a panel of over 30 direct lenders, all of which are authorised and regulated by the FCA.
CashLady can search our panel for a short-term, personal loan between £100 and £10,000, with repayment terms between 3 and 60 months, depending on the amount of money you apply to borrow.
How to use CashLady’s credit broking service
Whatever your credit score, you’re welcome to search for a loan with CashLady if you:
- Are over the age of 18.
- Are a UK resident.
- Have a UK bank account and valid debit card; and
- Have a regular source of income paid into your bank account.
Here’s how it works:
1. Tell us how much money you need to borrow and how long for.
2. It’ll take us just 60 seconds to run a soft search with no impact to your credit score and scan our panel of lenders.*
3. It’s a match! If we’ve found you a loan, you’ll be redirected to the lender’s website where you can find out more.
4. If you’d like to make a full application, the lender will complete a creditworthiness assessment, which will include a hard search or an Open Banking Check.
5. If you pass the lender’s checks, you’ll be officially offered the loan and will be told when to expect your money in your account.
*Searching for a loan with CashLady will not affect your credit score; however, if you’re matched with a loan and choose to make a full application with the lender, they will carry out a creditworthiness assessment. This will include a hard search or an Open Banking check. Multiple hard searches in a short space of time will harm your credit score. It’s also worth noting that a hard search will remain on your credit file for up to 12 months.
What are my chances of getting a loan with bad credit?
You could get a loan, even if you have a history of bad credit, although it’s crucial to be aware that you could be offered a higher rate of interest, and this will increase the overall cost of borrowing.
Several of the lenders on the CashLady panel specialise in loans for people with bad credit and could be willing to consider your application.
What to do if you can’t make your repayments
If you’ve taken out a loan that you can no longer afford to repay, you should contact your lender. There could be things they can do to help ease the situation, and while every lender is different, this could include a repayment holiday or temporarily reduced payments.
Worried about money or debt? Please know that you can reach out to any of the following charities: StepChange, MoneyHelper, Citizens Advice, and National Debtline.
