What are lenders looking for when deciding about personal loan approval? Find out the different criteria with Personal Loans Now so that you can be more successful when applying! We work with a fully FCA-authorised broker to provide loans you can trust.
How does online personal loan approval work, and what can I do to increase my chances of approval?
- How do lenders decide about approval?
- Your credit score – it does make a difference
- Alternatives to personal loans
- Borrowing on a low income
Personal Loan Approval
When you want to borrow money, the first thing to remember is that lenders want to approve your application. This is the way that the finance companies make profits. Often lenders use strict criteria for personal loan approval. Lenders want to be sure that you can repay the loans so that they make their expected profits.
To this end, UK personal loan lenders will look at your credit score. Lenders will consider the amount you want to borrow and may even factor in your post code before granting a loan. Other significant factors that an underwriter will take into account are the size of your income, the stability of your lifestyle and the amount of debt that you already have. Different lenders apply different rules but all use the same basic facts to enable them to come to a decision about personal loan approval. Although being rejected by one lender is disappointing, it does not mean that you will necessarily be unsuccessful with another.
Important Fact: Some comparison money websites and lenders offer customers ‘soft’ credit searches when applying for secured personal loans. These promise to not leave a footprint on your credit rating – but how do they work? And are they reliable?
Whenever you make an application for a credit card or loan it leaves a mark on your credit score. Applications typically make up about 10% of your credit score – so making a large number of applications can have a negative impact on your rating– Source: “This Is Money,” January 2012
Personal Loans Quick Approval
In the past, it was not unheard of for a personal loan approval to take several days. The applicant had to present all sorts of paperwork which the prospective lender then had to sift through, as well as carry out their own checks, before reaching a final decision. With the advent of technology, a lot of this is done automatically and UK flexible personal loan underwriters have all the information they need at their fingertips. Now, a personal loans quick approval means a wait of up to a few hours before finding out if the application has been approved or declined.
Personal Loan Instant Approval Checks
Most lenders use a similar series of checks when approving an instant personal loan. Whilst each lender may have its own criteria about what credit score will make you eligible for a loan, the other checks that are made are usually of a similar nature. A lender will look at your employment record and current status, and investigate your financial history. These checks tend to be more thorough if you’re applying for a fast self employed personal loan, and some lenders will not lend to you. Lenders will also look at statistics for people with a similar financial background to help them evaluate the risk they take when giving you a loan.
If you have a low credit score, a lender may ask for a guarantor to co-sign the loan agreement.
Loan Approval for Bad Credit
As already mentioned, a good credit score will ultimately depend upon the scoring system used by a particular lender. A credit score can vary from 0 – 999 and if you have a higher credit score you can find it easier to get a loan.
- 0 to 560 is’very poor’ and will mean rejection from most lenders for loans, credit cards and mortgages.
- 561 to 720 is ‘poor’. You may get credit but at a higher rate of interest.
- 721 to 880 is ‘fair’ meaning you may get a reasonable rate of interest but may not be able to borrow high amounts.
- 881 to 960 is ‘good’ and will help to get you credit but not necessarily the very best rates or deals.
- 961 to 999 is the top scoring band which means you should get the best offers, although there are no guarantees.
Information from Credit Files
If you apply for a quick personal loan, you are giving permission for a lender to have access to all the information on your credit file. On this file, a lender can find out how long you have been in your home and whether you can vote. The file also shows information about any county court judgements, bankruptcies or debt relief orders that are in place.
The credit file shows how you manage your financial affairs on a day to day basis. This helps lenders to decide what level of risk they are taking if they agree to give you a loan. A lender will see how many times other lenders have accessed your file. This reveals how many times you have applied for credit in the last year. Your lender will check whether you are financially linked to someone who has a bad credit record.
Research carried out by National Savings & Investments reveals that 46% of men and 40% of women have a joint account with their partner – source The Money Advice Centre.
All of the above factors will influence the lender’s decision about an application for a personal loan.
Note: If your credit file contains a CIFAS warning this means that you have been subject to a fraud. Lenders who are members of CIFAS can see this warning. Lenders must make further enquiries concerning your personal details before making a decision, but may not turn down an application because of the warning.
Having difficulty finding a personal loan?
Monevo's unique technology selects suitable lenders from an entire lending panel. Apply now with Personal Loans Now!APPLY NOW
Been Refused a Loan?
A lender will sometimes refuse a loan because the amount you want to borrow is too high. If this happens you can consider asking for a loan with a guarantor and as long as the guarantor has a good score you may be able to get the amount you have requested.
Alternatively, you may be able to ask a lender to see about approving a personal loan for a lower amount. Or perhaps you can be offered personal loan at a higher rate of interest or over a longer term. Affordability is one of the most important factors when lenders agree to a loan.
Need a Loan Been Refused Everywhere?
Being refused a personal loan is not the end of the world. And, if this has happened to you, there are other ways of raising money.
If you have a desperate need to borrow, and no one in your immediate family can help, then you could consider going to a credit union. Credit unions are non profit making organisations which offer loans at low interest rates. The sums on offer are not usually as high as those offered by finance companies so you may only be able to borrow a smaller amount. However, this could be enough to help you out of a financial hole.
There are a limited amount of people who can apply to the UK government social fund. This fund gives help for one off expenses to those on a low income. Typical urgent expenses might be to help with funeral costs or to help with a large fuel bill.
Low Income And Lending
If you are on a low income and apply for the cheapest personal loans, a lender will work out your ability to pay. This is one of the most important factors that your lender check when approving a personal loan application. Lenders want to get their money back with a good return. However, most importantly they want to ensure that you can repay what you have borrowed. So, before asking a lender to look at personal loan approval, you should really think about whether this will help or hinder your financial situation, both now and in the future.
Will a personal loan help you?
Apply for personal loans from a company that genuinely cares about you.APPLY NOW
Anyone with a high amount of existing debt should look at the alternatives instead of getting deeper into a financial quagmire. It is easy to check your eligibility for a personal loan by using one of the online loan eligibility calculators. You will not leave a mark in your credit file by doing this. It is a soft check. Using an online eligibility calculator will not reduce your credit score. Feel empowered, knowing how and why lenders make the checks that they do. Before you apply for a loan, you can make a decision about whether now is the right time to apply for a personal loan.
Personal Loan Approval – A Summary
In this article, Personal loans Now explained what most lenders are looking for when deciding about personal loan approval. We also looked into how to understand your credit score figure, and go into that further in a different post: Learn About your Credit Score. If a lender rejects your loan application, all is not lost! We discussed why this could be, and some possible next steps. Personal Loans Now is an Introducer to Monevo, who have one of the largest panels of personal loan direct lenders in the UK. By submitting an application with us, you are ensuring that the lenders most likely to give you a personal loan approval will receive your application, and both us and Monevo will do our best to ensure that, if you are eligible, you receive a personal loan with best interest rates. Apply now, and if approved, you could receive the money today!