The cost of a personal loan has dropped dramatically in recent years – with lenders now offering products with an interest rate below 3%.
With providers in a race to attract customers with their offers, it could well be the right time to sign up and get a good deal.
If you need finance – whether it’s to finally replace your old banger of a car, do up the kitchen after Christmas killed it off or afford that holiday that you desperately need to escape – then seeking loan advice can be a sensible way of helping you reaching your goals.
However, loans will only help you if you’re approved. You can make the most detailed financial plans going but if you’re rejected then they won’t be any good to you.
So, how do you ensure that your application will be successful?
Improve your credit score
When you apply for finance you will be assessed by would-be lenders, who will weigh up whether or not they think you will be able to pay them back. Their judgement comes from your credit rating – a score given to you based on your financial past by an agency. By being sensible with your money and paying off credit cards, loans and bills on time you can build up a good reputation and, in turn, a decent score. However, it’s worth reviewing your file and making sure there are no errors on it that might affect your rating and, therefore, your chances of taking out a loan.
Do your own mini audit
In essence, you can have a fair go at deciding your chances of success by taking a thorough look through your own finances. Go through your most recent two or three statements, take a look at all of the regular expenses you pay out and what is left from your pay packet afterwards. You’ll know yourself how much you can afford to pay out on a loan and if it’s looking tight then you’ll need to cut down your outgoings – shopping around for a better deal on your bills, for example – before you go further.
Don’t go chasing a ‘good deal’
The sorts of headline-grabbing low rates might only be offered on loans over a certain amount of money. Don’t be tempted into thinking you should apply for lots more than you need just to try to get the lowest rate. Applying for too much might well cause you to be turned down. You should shop around and compare the APR, but don’t fall into the trap of wanting too much.
Don’t take out too many products
Your credit score won’t be helped if you’re trying to do too much at once. It’s best to try to pay off a credit card or loan before you take out another and ‘settling up’ could boost your chances of approval.
Do your research
Reading up in advance could save you a lot of time. Many lenders will have eligibility criteria and a quick five minute read of these will save you from the hassle of applying for something that isn’t right for your circumstances.