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5 Things to Consider Before Applying for A Loan In The UK

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5 Things to Consider Before Applying for A Loan In The UK

Borrowing a loan requires financial literacy and discipline because it involves borrowing someone else’s money. So, before you set out to borrow a loan, you need to do some serious research and financial planning. There are primarily five things to consider before applying for a loan in the UK — the credibility of the lender, borrowing costs, repayment clauses, processing time, and the lender’s reputation. So, when it comes to borrowing a loan, you must proceed further only after you have researched these five things.

Verifying the credibility of any lender in the UK is a pretty straightforward process. All you need to do is browse through the online FCA register to check the lender’s status. The financial services industry in the UK is a well-regulated sector and the status of all legitimate lenders is regularly updated on the online FCA Register. So, you can easily confirm the status of the lender you wish to borrow from. Also, you need to check the aggregate borrowing costs that come with a loan. Always remember that interest is only one of the many costs that you incur while borrowing a loan. Besides interest, you also need to pay the loan processing and set-up fees while borrowing a loan. So, you must make a detailed study of the offer and seek more clarity.

The third thing that you must consider while borrowing any type of loan is the flexibility that you have while repaying the loan. So, its always recommended that you stay prepared for the tough times and negotiate at least three delayed payments per year. This means you need to ensure that the lender explicitly agrees to not report at least three delayed payments each year. In the UK, you need to negotiate this sort of arrangement because the credit agencies constantly record your financial actions such as repayments, defaults, late payments, multiple loan applications, and several other actions.

Finally, you need to ensure that you are dealing with an ethical professional lender with a high reputation in the financial services industry. At Money Pig, we do most of this initial scrutiny for you and partner-up only with lenders that have a high reputation, hold an FCA license, offer transparency and flexibility. Also, you need not worry about the processing time because we have a standard set of procedures that are designed to expedite the process.


FAQs | 5 Things to Consider Before Applying for a Loan in the UK

  1. How to borrow a personal loan in the UK?
  2. How to choose a lender in the UK?
  3. What should I consider before applying for a car loan in the UK?
  4. How to apply for an urgent loan in the UK?
  5. What should I consider before applying for a loan with a low credit score?
  6. How much money should I borrow?
  7. For how long should I borrow a loan?
  8. How to avoid missing payments?
  9. What credit score do you need to apply for a loan in the UK?

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How to borrow a personal loan in the UK?

Personal loans are the most popular type of loans probably due to its very nature. What makes it so desirable is the ease of borrowing funds. Moreover, once the funds are released, you can use it as you please. You could spend those funds traveling, buying a car, paying for accommodation, etc… However, it is not always easy to get a personal and to get one you must have a good credit score. This is mainly because a personal loan is a type of unsecured loan that is advanced without any restrictions on the usage of funds. So, if you want your personal loan application to be successfully processed, then there are five things to consider before applying for a loan in the UK.

First off, your credit score plays a major role in whether or not the lender would process your personal loan application. Sadly though, most people find out about their low credit scores only when they apply for a loan. So, as a precautionary measure, you need to educate yourself about the many things that could lower your credit score and avoid them. This includes delayed repayments, missed repayments, non-payment, check bounce, defaults, applying for too many loans over a short period of time, and loan rejections.

The second thing that you must consider before borrowing a personal loan is the amount that you intend to borrow. Most people are of the opinion that they must borrow the maximum amount that a bank or a lender is willing to sanction to them. However, that isn’t the right way of doing things because, with every extra pound that you borrow, you incur borrowing costs. So, it is always better to borrow only as much as you need. The third and most critical factor is the duration of the loan because this would have a direct impact on your interest rate and monthly payments as well. Most lenders charge lower interest rates when you borrow a loan for a longer period. Also, a longer repayment period means lower monthly payments.

Next, you must avoid applying to too many lenders as that could lower your credit score. Moreover, most people apply to multiple banks and direct lenders because they believe in comparing offers before choosing one. At Money Pig, we let you do this by submitting a single loan application to us. We then pull out suitable quotes for you, which you can compare. Fifth and the most important factor is the prepayment clause in your personal loan agreement. Since people borrow personal loans as a short term arrangement for a variety of reasons, it is advisable that you look for a no-penalty prepayment clause. By repaying your loan early, you not only improve your credit score but also minimize your borrowing costs.

How to choose a lender in the UK?

Once you have decided to borrow a loan, then know that there are five things to consider before applying for a loan in the UK. Start by looking up for the lender’s FCA license number, and if you cannot find it then run a quick search for the lender on the online FCA Register. In the UK, it is mandatory for all lenders to hold a license issued by the FCA. The second most important thing is to exclude any lender who claims to offer loans without a credit check. Most people that are concerned about their credit score fall prey to loan sharks who lure them into an illegal loan arrangement. In the UK, it is legally impossible to get a loan without being credit checked. To uphold the integrity of the financial services industry, the FCA has made it mandatory for lenders to perform credit checks before advancing a loan.

So, instead of looking for no credit check loans, try applying for Money Pig’s bad credit loans. This is a legal arrangement that we have worked out with our network of lenders, which does not skip credit checks. However, it does not reject loan applications based on low credit scores and is designed for those who have made financial mistakes in the past. The third thing that you need to consider before finalizing a lender is his track record. You can do this by looking up for reviews on Yelp and Google My Business. Next, you need to check the borrowing costs charged by the lender, and to do this, seek a clear break down of the APRs. Also, clarify if there are any other costs that you would incur as a one-time fee at any point such as on prepayment of the loan or on auto-renewal. Finally, you need to check with the lender if he requires you to furnish security or guarantor and make the decision based on your convenience.

What should I consider before applying for a car loan in the UK?

There are five things to consider before applying for a car loan in the UK — type of car, buying arrangement, interest rate, ownership, and affordability. The type of car you choose to buy — whether brand new or pre-owned — determines the kind of buying arrangement that you can enter into. Some options include hire purchase, personal contract purchase, personal loan, and car loan. In the case of hire purchase and personal contract purchase, the buyer is required to deposit around ten percent of the car’s value as a down payment or deposit. The rest is to be paid in monthly installments and so if you draw a decent salary and have lesser expenses then you can borrow a loan to pay for the ten percent down payment and use your savings to pay for the rest.

Most car buyers are however of the opinion that they end up paying more when they buy a car through hire purchase or personal contract purchase when compared to short term loans. That brings us to the third factor that you must consider before borrowing a loan, which is the APR. This includes interest rates and most other borrowing costs which are converted into percentage and spread throughout the loan period. Next, you need to decide whether you are keen on owning the car right from the start or can wait until you have repaid the entire loan amount.

If you are buying a pre-owned car, then it is best to have the ownership of the car from the very beginning. This is not possible when you purchase a car using a car loan, hire purchase, or personal contract purchase. So, in this case, it is recommended that you opt for a personal loan, which gives you the car’s ownership from the very moment you purchase it. Finally, you need to ensure that you can afford to pay for the car comfortably even if you lose your job. So, make it a point to have some savings kept aside as emergency funds. Also, find out the maintenance costs of the car you wish to purchase and see if you can afford it.

How to apply for an urgent loan in the UK?

Applying for emergency loans in the UK can be quite tricky unless you remain cautious and make the right decisions. Especially, while the entire world is dealing with the coronavirus recession, the economic slowdown has clearly increased the demand for loans. So, if you plan to borrow one to cover up your day-to-day expenses then there are five things to consider before applying for a loan in the UK. You must start by exploring options such as bank overdraft and credit card which may already be available to you. Contact your bank and check how much money you can borrow through your card and overdraft. If that does not work out for you, then you have no choice but to borrow a loan. So, the second thing you must consider is the loan processing time. You must find lenders who process loans extremely fast because you are dealing with an urgency.

Next, check how much money you can afford to borrow and repay promptly because at the moment the job market isn’t very stable. In the UK, not repaying your loan on time could have a long-lasting impact on your finances. The fourth thing you need to consider is how you can borrow less. You can do that by vetting your credit card statements to find out expenses and subscriptions that can be canceled. Most people tend to spot some subscriptions and expenses that they can cut back on.

The fifth and most important thing you need to consider is the borrowing cost because most lenders charge very high-interest rates when you are in a hurry. However, at Money Pig, our lenders are very ethical and offer the most competitive interest rates on urgent loans, which we classify as emergency loans. Some emergency loans offered by our lenders include fast cash advances, instant loans, payday loans, same day loans, and several others. You can choose any type of loan and apply for one by submitting an online application on our website. At Money Pig, we offer free loan application and processing for all loan applicants.

What should I consider before applying for a loan with a low credit score?

In the UK, your credit score is one of the most important factors that banks and lenders evaluate to assess your suitability for a loan. So, if your credit score is low then your options are automatically limited. That’s because most banks and lenders in the UK do not advance loans to individuals with a low credit score. On the other hand, the financial services industry in the UK is infested with loan sharks that you must avoid. So, there are five things that you need to consider before applying for a loan in the UK — improving your credit score, finding a licensed lender, looking for a lender who gives bad credit loans, checking if you need a guarantor, and evaluating your affordability.

Start by exploring ways to improve your current credit score by evaluating the reasons for it to be low. If you have not defaulted, made late payments, or made any other financial mistakes then it could be something that you missed complying with. In the UK, your credit score can get affected for many reasons such as not being on the electoral roll, not furnishing the correct address, association with a partner or spouse who has a bad credit history, etc… So, check if you are on the electoral roll and whether your address is updated in the records. Also, if you had made any joint borrowings with a spouse then consider disassociating yourself, on records. Especially, if you have separated from that partner or divorced him or her.

While you are doing all of this and trying to improve your credit score, Money Pig’s FCA licensed direct lenders would have no trouble advancing a bad credit loan to you. Our Experts will also help you evaluate your affordability and plan your loan period in a better manner. For those struggling with bad credit, we usually recommend a longer repayment period, which means smaller monthly payments. Our lenders also offer bad credit loans with no guarantor, so you need not worry about that.

How much money should I borrow?

While borrowing a loan, one of the most important things to consider is how much should you borrow. Well, the answer to this question depends on why you plan to borrow the loan. If it is to purchase an asset such as a car, then it is always wise to fund at least thirty percent of the asset’s value from your savings and borrow a loan for the rest. Likewise, while buying a home or any other real estate also, it is advisable to invest at least twenty percent of the asset value from your savings.

On the other hand, if it is a need-based borrowing then it is always recommended that you borrow as little as you need. Whichever type of loan you wish to borrow, structure it in a manner so that your monthly payments do not exceed forty percent of your monthly income. To sum it up, there are five things to consider before applying for a loan in the UK — your monthly income, living expenses, foreseeable expenses, monthly payments towards existing debts, and your credit score. Based on these factors, you need to apply for a loan amount.

For how long should I borrow a loan?

There are five things to consider before applying for a loan in the UK — borrowing amount, loan tenure, your current income, current liabilities, and your monthly expenses. If you have a steady source of income with no other liabilities, then you must borrow the loan for a shorter period. However, if you have other debts to repay or if you wish to minimize your monthly repayments for some reason, then consider borrowing a long-term loan. It is usually recommended that you reserve a maximum of forty percent of your earnings towards the repayment of debts. So, with that in mind, you must plan the duration of your loan and structure it accordingly.

How to avoid missing payments?

People fail to repay their loans on time either deliberately or because they find it difficult to keep track of multiple debts. With some planning, you can eliminate this possibility and avoid missing payments. Deliberate missing of payments occurs when you borrow more than you are capable of repaying. You must know that you need to promptly repay your loan in the UK if you wish to keep your credit score up.

A good credit score entitles you to several perks and one of them is lower APRs. Those having good credit scores are offered lower APRs because lending money to those with a good credit score is less risky. The second scenario is when a person owes multiple debts and is incapable of keeping track of all his debts to repay the lenders. In that case, we recommend that you consolidate all your debts into a single loan. Money Pig’s lenders offer both secured and unsecured loans to consolidate debts. Once you do that, then you need to repay the amount to only one lender which makes things easier for everyone.

What credit score do you need to apply for a loan in the UK?

You need not worry about your credit score in order to apply for a loan in the UK. Money Pig has worked out a win-win arrangement with its network of lenders to ensure that everyone who can repay a loan, gets one. So, even if you have a low credit score, we can find you a lender from our network. You only need to fill and submit the free online application available on our website.

Money Pig is a financial service intermediary that connects you to some of the best lenders in the UK. For the best deals on all types of loans, Apply Now.