It seems that you can no longer log onto the internet, turn on the TV or listen to the radio without seeing or hearing an advertisement for a loan. In these tough economic times where money is tight, it can be very tempting to take up these invitations.
As tempting as it may seem, jumping straight into an application without researching the product, or indeed the alternatives isn’t recommended. Not only could it mean you miss out on the best deal, but worse still – you risk being declined simply because you haven’t ensured you meet the lending criteria.
We’ve put together a number of things to look out for which will help to ensure you get the best deal:
APR
The first thing that most people look at when considering taking out a loan is the APR – it’s almost as though it is seen as the ‘price tag’ for the loan. Currently, personal loan rates are at their lowest point for over 6 years with Tesco Bank, Clydesdale Bank and Derbyshire Building Society leading the way (5.1%). While this rate is very eye-catching, it doesn’t tell the full story; here are some things to bear in mind:
- 1. 5.1% is the representative APR which represents the rate that 51% of customers will get; the other 49% will get a different rate which is likely to be higher.
- 2. These low rate loans are reserved for those with immaculate credit history, anything less than this will result in the application being declined.
- 3. These rates are only available on loans of between £7,500 and £15,000, if you’re looking for more or less than this amount – you’ll have to pay higher rates.
So if you’re someone who has missed a few payments on loans or credit cards in the past, applying for these low rate loans may not be the best idea. Instead, go for a loan with a slightly less strict lending criteria and slightly higher rates.
Lending Criteria
While the APR will give some indication as to the stringency of the lending criteria, it won’t tell the whole story.
One of the most effective ways of finding a suitable loan is by going through a comparison site. This is because they have a vast panel of lenders, each offering a different product to suit various financial needs. Having entered some basic details on the brief application form you will presented with a range of suitable lenders, along with a breakdown of their loan product, including things like:
- Representative APR
- Representative Example
- Any Rewards you may receive (e.g. loyalty card points)
- Any additional comments
To learn more about the loan product you’ll need to hit the ‘proceed’ or ‘go’ button, having done this you’ll hit the lenders generic landing page. This landing page will tell you a little bit more about the product and will give you’re a chance to check you’re eligible. A standard landing page will state:
- The Basic Criteria
- Credit history criteria
- Bank Account Required
- Required residential status (e.g. permanent UK resident)
- Age criteria
- Things you’ll need during the application
- Current employment details
- Address details (for the past X amount of years)
- Details of current income
- Debit/ credit card details
- Time required to complete application
Naturally, different lenders will have different applicant requirements, by checking that you meet each of these requirements you’ll avoid any knockbacks which could ultimately affect your credit history.
