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If you decide a loan is the best option for you, there are a number of ways you can apply for one. Comparison tables on CashQuestions can help you compare what different lenders offer. Also, the internet in general is a good way to shop around for a good deal, as some of the cheapest loan providers only operate online.
If you are not keen on arranging your loan online it is a good idea to get quotes and figures from a number of firms or brokers before making a decision. A ring-round of lenders should include your mortgage company, which might offer existing customers preferential rates. Each lender should be able to tell you the APR they will offer you, and by comparing the APRs you should be able to work out which is the cheapest loan. Some will include PPI in their quote, but it is best to ask for a quote without this cover as you will normally be able to find it cheaper elsewhere.
When deciding whether or not to lend you money, lenders look at several factors. If you opt for a secured loan the lender will look at the amount of equity in your property – that is, how much it is worth compared to the outstanding mortgage on it.
Lenders will also look at your credit history, by contacting a credit reference agency such as Experian or Equifax. These firms hold information about how you have handled credit in the past and whether you have missed any payments or have any county court judgements (CCJs) against your name.
Loan providers also look at your income and judge whether it is sufficient to make regular loan repayments as well your other living costs.
Lenders score customers in different ways, so if one lender turns you down you can try again with another lender. But bear in mind that each application will be noted on your credit file. Too many refused applications will have a negative effect on your credit history.
If you already have a loan it is possible you will be able to save money by switching to a better rate. First you need to check if you will be charged an early redemption penalty by your existing lender, and include this when calculating whether switching would save you money.
If you are refused a loan it is important to find out why. Lenders prefer applicants to be correctly entered on the electoral roll, so make sure you are listed at your current address. Also contact a credit reference agency and make sure the information they have on you is correct.
If you have an impaired credit rating you might find it more difficult to find a loan, and you are likely to be charged a higher rate than if you had a perfect credit history. If you find yourself in this situation your best bet is to speak to a broker that specialises in sub-prime loans. However, if you have had credit problems in the past consider whether it is really wise to borrow more money.
CashQuestions Guide to Unsecured Loans
CashQuestions Guide to Secured Loans
The Importance of your Credit Rating
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