When you check your eligibility for a loan, you might find it pretty confusing. Lots of jargon, acronyms and loads of detailed questions about your money (or your ‘financial position’).
So enough of that. It’s time we rolled up our sleeves and did some loan unravelling.
Read these points carefully to give yourself the best chance of success, with the least damage to your credit score.
Check your credit score
The first thing to do before you check your eligibility for a loan is check your credit score. Your credit score is given in your credit report, which are easy to obtain from a credit reference agency.
Your credit report gives details of your credit history to help lenders work out if you can take out credit or a loan.
If you’ve repaid your past debts or loans on time and in full, then your credit score is likely to be higher.
But if you’ve missed repayments, received County Court Judgements (CCJs) or there are other signs that you’ve struggled to manage your finances, then your credit score could be lower.
If you find that your credit score isn’t what you expect, be sure to read our guide to help you improve your credit score.
Consider other types of borrowing
The type of lending you choose should be led by how much you want to borrow, and the length of time (the term) over which you repay the loan.
For example, if you need a large amount of credit for home improvements, then an advance on your first charge mortgage, a remortgage or a secured loan could be more suitable than a credit card.
With any big decision, it’s always worth taking your time to weigh everything up. So looking around to make sure you’ve got the right loan for you is always worth it.
Some sites offer a pre-application eligibility checker, which lets you see if you are likely to be accepted for credit or a loan without leaving a credit footprint on your credit report.
Know your APR
It’s always worth checking the APR on any borrowing to make sure you understand fully the financial commitment you are getting into. Also, be aware that the APR and Representative APR could also be different figures entirely.
Check you can afford the loan repayments
It’s important that before you accept a loan offer that you make sure you can make the repayments.
If you don’t make payments (or miss them), it will negatively affect your credit score. If this is happening, talk to your lender to get help as soon as possible.
Get help if you’re struggling
If it’s a struggle to make your credit or loan repayments, don’t ignore the problem. Talk to your lender as soon as you can about your options – they will be able to help you.
Alternatively, you can get free, confidential help with your finances from the Money Advice Service.