As we have said before, if planned correctly, borrowing money can be a sensible way of spreading the cost of a large purchase. In fact, we offer a range of loans ourselves! Whomever you borrow from through, if it is for something essential, such as a car, then any hold up in obtaining the credit you need and have planned for could get in the way of other plans or obligations like a new job or looking after someone, or a family holiday.
How frustrating is it then to be turned down for a loan that you are confident you can afford?
In some cases, it might be because the lender doesn't share your view of the risk of you not repaying the loan. In other cases, how you apply and the information you provide can be the barrier.
Here's our guide to increasing your chances of getting the loan you need.
Check your credit report
It can be a good idea to check your credit report to make sure there are no mistakes on your file.
Remember, your credit report isn't the only thing that a bank will look at when deciding; other factors are also considered.
Improving your credit rating
If you need to, there are some things you can do to improve your credit rating. These include:
• Getting on the electoral register
• Making sure you make any existing repayments on time.
• Remember that late or missed payments can negatively impact your credit rating.
Don't apply for too much (or too often)
Multiple applications in a short period can give the impression that you're having trouble managing your money. If you're looking to see how much you'd need to pay back per month, you can estimate from a calculator.
"Soft" check your eligibility.
You can use various online eligibility checkers (also known as soft search tools). These let you know which loan products you're likely to be approved for without actually counting as a credit check. The idea is that you can then limit your actual applications, as you can apply to a lender likely to accept you.
Make sure your application is accurate
Sometimes even a small mistake can impact the outcome of your application.
Loan providers use the personal details you've provided to carry out a credit check, and incorrect information may result in a 'fail'. For example, use your full names and not abbreviations and include middle names.
Include all addresses you've lived at for the last three years and make sure your contact details, like your phone number and email, are correct. If you mistype these, the provider won't contact you quickly to clarify any points of clarification.
Plan ahead
Even with improvements in technology, some loan providers might not make decisions immediately. If you decide you need a loan, don't "bank" on obtaining one at the last minute – it may take longer than you think and could mean you sign up for something without reviewing all of your options.
Have your bank statements to hand
Many loan providers will ask for your information about your income and expenditure as part of our loan application – make sure you enter actual amounts shown on your statements instead of guessing.
Make your own assessment of how much you can afford
Having information to hand about your finances is one thing but applying for a loan is a real opportunity to look at your finances in the round and decide if you can afford it. For example, if you have not been routinely saving (let’s say) £150 per month, what changes do you need to make now to afford the same repayments on a loan.
Maybe some small changes can all add up to making the difference? It’s one of the reasons why saving with a credit union (and making the changes in your finances to be able to do this) can make it easier for us to lend you money sooner rather than later.
Producing a realistic budget, both as things are now and thinking through what changes you could sustainably make, is a perfect way of asking yourself these questions.
