- Applying for a personal loan
- Identification documents required for the application
- Checking a credit file
- Proof of income
- Self-certified loans
Need to Apply for a Loan?
It appears to be very simple, by internet adverts, to apply for a loan. Most lenders offer same day cash into your bank account. A loan is only possible if you have an excellent credit record and meet all the requirements for identification and proof of income.
To get an unsecured personal loan using an online lender you will have to meet certain criteria. Therefore, just knowing what you need will improve your success.
How to Apply for Personal Loans with Banks
The simplest option if you are looking for a personal loan is to apply to your current bank. If your salary and household bills are all conducted through the same bank, the loans department will be able to see at a glance whether you can afford to borrow money.
There is another advantage for the lender if you use your own bank. The lender, can easily assess whether you are financially responsible and a good risk.
In reality, many people take this route. But, in using your own bank, you may not get the offer of a low-interest rate. What happens if you find a better rate from a different lender? Is this an easy option?
Applying For A Personal Loan – Eligibility
Some banks will only allow current customers to take out unsecured personal loans. On the other hand, others will lend to people who hold their main bank account elsewhere.
However, lenders other than banks will demand a comprehensive history of any previous borrowing. Mainstream lenders will insist on identification documents such as a driving license or passport, proof of current address and how much you earn.
All lenders apply age restrictions. This ranges from the lowest at 18, but it could be 21, until 80. (Different lenders have different rules.) So, the first hurdle to get over is that you must be a minimum of 18 years of age.
Secondly, to get a personal loan, you must be a UK resident. You must also be able to prove where you live and show proof of your income.
What Identification Documents Are Required
Taking out a personal loan is akin to opening a bank account. Original documentation is required, and this has to be produced as a means of verifying the identification of the applicant.
All registered lenders must strictly adhere to money laundering regulations. If the company do adhere to these regulations, the company concerned can be fined, receive a penalty or even get suspended.
Proof Of Identity to Apply for a Loan
Firstly, the list of documents for proof of identity is quite long and may include the following:
- Current EU/EEA passport, photo driving licence or identity card.
- All other current signed passports, with a valid UK Visa where applicable.
- Current UK non-photo drivers licence.
- HMRC Tax Notification.
- Young Scots Card.
- Biometric Residence Permit.
- Blue disabled drivers pass.
- Finally, benefits or pensions notification letter confirming the right to benefit.
Proof Of Address to Apply for A Loan
Acceptable documents proving where you live are shown below:
- Bank or building society statement.
- Utility bill (such as gas or landline phone bill) dated within the last six months.
- Local authority tax bill for the current year.
- Tenancy agreement issued by a solicitor, housing association, local council or reputable letting agency.
- Benefits or pensions notification letter confirming the right to benefit
Documents for both identity and address must be current, consequently, any expired paperwork will be insufficient. Proof of address must also include the full name of the applicant. Some lenders ask for one document to prove identity and two for the address. Others might request two of each proof.
Apply for Loan: Changing Address And Your Credit Record
Even if you have all the requisite documents to offer a lender, it is still possible that you will be turned down for best rate personal loans.
In the past, if you had recently moved house and the previous owner was a bad credit risk this could go against your own application. However, things have moved on. Credit reference agencies now follow the trail of an individual instead of using just an address to confirm the risk of an applicant.
Moving house can cause a temporary problem if you immediately apply for a loan. This could be down to your name not appearing on the electoral roll. But even if you have registered, it could take a while for this information to reach the credit reference agencies.
Similarly, any current loans, such as logbook loans, with other lenders may not yet be registered at the new address.
Checking Your Credit File to Apply
If you have moved home and are having problems getting a personal loan UK, it is worthwhile asking for a copy of your credit record. This will ensure that the details are up to date.
The UK has three credit reference agencies; Experian, Equifax and CallCredit. All of these agencies are required to provide a simple snapshot of your up to date credit record for a fee of £2.
Proof Of Income When Applying For A Personal Loan
If you are self-employed, providing proof of income when applying for a loan is different to the documents needed for an employed applicant.
Your employer may pay you under the PAYE system, lenders ask for the last three months pay slips or a copy of the previous years P60. If the lender you are applying to is not your usual bank, then they will also need to see bank statements. The statements show lenders details of the account into which your monthly salary is paid.
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Furthermore, self-employed applicants need to provide the last HMRC SA302 which confirms the salary for the last tax year. Lenders give self-employed loans provided all the other details are accepted. Also, if the lender is not your usual bank, you will need to provide copies of bank statements showing the relevant funds as per the form provided.
Moreover, you may also include any other sources of income too, such as private pensions or regular benefits as proof of income.
Applying for Personal Loans Without Proof Of Income
Some lenders approve personal loans for the self-employed who do not have annual accounts. Additionally, they may also approve employed people who are unable to prove how much they earn. These products are known as self-certified loans. Although they were popular before the financial crisis, they are now considered to be very controversial. Therefore avoid them at all costs.
The Financial Conduct Authority in 2014 banned companies in the UK from offering this kind of loan. Any business offering this kind of loan will have an address that is registered abroad. Consequently, any agreement taken out will not be subject to the scrutiny or regulations of the FCA.
Furthermore, interest rates for self-certified loans are very high. If you take on this kind of personal loan, you will receive no protection from the Financial Conduct Authority.
The first company to offer self-certification loans set up their firm in the Czech Republic but soon reached its lending capacity and had to stop taking applications – source Money.co.uk website
How to Apply for a Personal Loan: Summary
In this Chapter of The Ultimate Personal Loans Guide, Personal Loans Now provides you with the basic information required to apply for a loan such as a debt consolidation loan. This includes a few items. For example, what documentation you need for proof of identity and address. Furthermore, we guided you on accessing your credit record and what happens in the instance of a changed address Finally, be warned about the personal loans that are offered using self-certification. The Financial Conduct Authority UK banned them, but you can access them in Europe.