How to get a personal loan

Understanding personal loans

A personal loan can provide you with the funds you need to cover large expenses, consolidate debt, or make home improvements. Then you can spread the cost with fixed monthly payments, including interest.

It is a type of unsecured loan, which means it isn't tied to an asset - unlike a mortgage or secured loan. Instead, lenders will focus more on your credit history to assess your creditworthiness.

What to consider before applying for a loan

Before you apply for a loan, you should consider if it’s the right option for you. Here are a few things to think about:

Have you checked your credit score? 

Your credit score is a key factor that lenders look at when deciding whether to approve your loan application and what interest rate to offer you. The higher your credit score, the more likely you are to get approved for a loan with a competitive interest rate.

You can check your credit score for free from the three main credit reference agencies, Experian, Equifax and TransUnion.

How much can you afford to borrow?

Our personal loans range from £1,000 to £15,000. Only borrow what you actually need and can afford to pay back.

Do you want to make a single or joint application?

If you apply with someone else, then you might be able to borrow more than you would on your own. Both of you will be responsible for 100% of the balance. So, if one person doesn’t pay, the other person will need to cover the cost.

How long do you want the loan for?

The longer the loan term is, the smaller your monthly repayments will be, but the more you’ll pay in interest overall.

Are you eligible? 

You can check your eligibility and compare loans with us to find the best deal you can get from our panel of lenders. Checking won’t affect your credit score.

How much does it cost?

The Annual Percentage Rate (APR) shows you the total cost of borrowing over a year. It’s displayed as a percentage and includes all interest and charges, which makes it easier for you to compare different offers.

Would a credit card be more suitable?

Credit cards can sometimes work out cheaper than loans if you only need to borrow a small amount. Plus, you won’t pay any interest if you clear the balance in full and on time each month. Some credit cards come with 0% introductory offers.

Tips for getting approved for a personal loan

Whatever your credit situation, there are some steps you can take to improve your chances of getting approved for a personal loan:

• Check your credit report for errors and dispute any mistakes.
• Always pay your bills on time – to build up a good credit history.
• Reduce existing debt to lower your credit utilisation and improve your debt-to-income ratio.
• Provide proof of income and employment to show you can afford to repay the loan.
• Register to vote as lenders check the electoral register to check your identity.
• Use eligibility checkers to compare offers to find the best rates and terms – without affecting your credit score.
  
  

What documents do you need to apply for a personal loan?

Once you've chosen a loan, it’s time to get your paperwork together. Lenders will usually ask to see:

• Proof of identity - such as a passport or driving licence.
• Proof of address - a utility bill or council tax statement, for example. Most lenders will also ask for at least two to three years of your address history.
• Proof of income - such as pay slips, or tax returns if you’re self-employed.
• Bank statements – they can use these to see how you handle money and decide how risky it’d be to lend to you.

Having these documents ready will help to streamline the application process.

Submitting your personal loan application

The next step is making a full loan application, either online, by phone, or in person. Nowadays, most lenders are online, which makes the process quicker and more convenient.

You simply need to fill in the form and provide any documents that the lender asks for. Then they will run a hard credit check and review your application.

All regulated lenders must carry out a hard credit check upon application, as per the Financial Conduct Authority’s rules. ‘No credit check’ loans don’t exist.

What to do if your loan is accepted

If you’ve been accepted for a loan, that’s great news!

Make sure you carefully read the loan agreement, and are happy with the terms and conditions before you sign it.

What to do if your loan is declined

If your loan application is rejected, there is still a chance that you could be accepted by a different lender. But we would recommend waiting at least three months before you apply again. Making multiple applications in a short space of time can cause your credit score to drop temporarily.

In the meantime, you could look to improve your credit score, to boost your chances next time round. Remember to use an eligibility checker before you apply, to see if you qualify and protect your credit rating.

 

Getting a loan with bad credit

While taking out a personal loan can be more difficult if you have bad credit or no credit history, there are still some options to consider.

Bad credit loan

Our bad credit loans work like personal loans, where you borrow a lump sum and repay it in monthly instalments, including interest. But it’s generally easier to get accepted for a bad credit loan, as you don’t need to have a good credit history.

One downside is that interest rates tend to be higher due to the risk the lender is taking.

Guarantor loan

 If you have a family member or friend with good credit who is willing to act as a guarantor and sign your loan agreement, you may have a better chance of getting approved. Keep in mind that your guarantor will be equally responsible for repaying the loan if you can't.

Credit builder loan

A credit-builder loan is designed for people with no credit history or those who have experienced financial setbacks. These loans can help to establish or build your credit score if you always pay on time.

Unlike standard personal loans, where you receive the money upfront, credit builder loans usually need you to make payments first. Once you’ve paid it in full, the lender will release the money to you.

Some credit builder loan providers charge subscription fees, so make sure you check this before deciding to sign up.

Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.