Where to start when applying for a loan

Where to start when applying for a loan

Finding where to start

So you've decided to apply for a loan. Maybe you need a new car, want to undertake some home improvements or you have an unexpected household expense. To those that haven’t experienced the process in the past, lending can seem quite daunting. There’s a multitude of online, television and radio advertising all fighting for your attention - but where do you actually start when applying for a loan? First things first - you’ll need to know your figures.

Know what you want from the start

Before you apply for a loan it’s best to have the amount you need in mind. Don't try and guess this otherwise you might be trying to take out a loan that does not meet your requirements. There is nothing worse than realising you are going to be short, especially after you have been accepted. So, if you are buying a car or making household improvements get some quotes on how much these will cost. Adding extras to your loan further down the line, or having to take out extra loans to cover the shortfall could get expensive and may have an adverse effect on your credit file.

What can you afford?

Your next step is to calculate how much you can afford to repay each month. This will then help you to work out how long you need a loan for. Signing up for a loan without working out your monthly repayments first might land you in trouble later down the line, especially if you haven’t factored this into your monthly budget. The best way of doing this is using a spreadsheet and you can download the Choose Wisely budget template for free. This will help you to get an overview of your incomings and outgoings including:

  • Mortgage or rent
  • Gas and electric
  • Council tax
  • Phone and internet charges
  • Monthly food bill
  • Monthly clothing bill
  • Car and transport costs
  • Any entertaining costs

Once you have your total expenditure, subtract this from your monthly income. This final figure is the amount that you have left over that can be used to cover your loan repayments.

Check your credit rating

Do you know how healthy your credit rating is? Or do you have any bad debts or outstanding CCJs? Having any of these will not stop you from being accepted for a loan, but it will influence the type of loan that you can apply for, so you’ll need to do more research. Several websites do run a free service to let you view your credit file, so give these a try. This will also let you know about any bad debt that you might not have been aware of, and allow you to check that all your details are correct - if not, you’ll need to dispute these and get them amended before applying for a loan.

Shopping around

There are so many types of loan available so it’s important to research which might be best for you - personal loan, guarantor loan or high-cost short-term, each comes with their own words of warning but as long as you’re aware of them, you should be able to manage your loan effectively. The size of your loan, how much you can pay back every month and whether you have a bad credit history will all influence the best type of loan for you. Remember that you will be paying interest on the loan and the interest rate will differ between types of loans and also between different lenders. Each loan will have its own set of criteria for applying. Using a comparison site such as Choose Wisely is a great place to continue your hunt for the best loan for your circumstances. By using our personal loan comparison tables you can see the range of loans available to you and the first point of call should be our Smart Search. This is 100% free, won’t affect your credit file and will provide you with suitable lenders to compare.

Personal loan acceptance criteria

Now you need to read the details of the loan to see if you qualify, and check the APR. Always read the pros and cons of that particular loan in our reviews, and when you feel comfortable then apply. Fill in the loan form accurately and remember to read the small print. If you feel that you cannot meet the repayment deadline or the repayment amounts on that loan then move on to something more suitable. By using a comparison site you should get the best deal for your circumstances. As you can see, being armed with the right information can be helpful when you’re applying for a loan.

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Use the Choose Wisely Smart Search tool to find a suitable lender, without impacting your credit score.

Written by Mark
Published on 5th July 2017
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