How to prepare for a loan application

Whether you need access to quick cash to cover an unexpected expense, or are borrowing many thousands to help pay for a house extension, applying for a loan is a surprisingly similar process. Providing you have opted to borrow through a responsible lender, you will be asked to provide some personal information, which will allow your lender to check your credit, employment and income status. They will also look at your existing financial responsibilities and regular outgoings.

The amount you can borrow, the length of time you have to repay the loan, and the rates you are offered will largely be based on the results of these checks. They will, therefore, vary from borrower to borrower and provider to provider.

Online or at the bank?

Generally speaking, consumers apply for loans with online providers or high street banks. Many banks offer personal loans with decent interest rates to their existing customers who can apply online or in person, at a branch, if they prefer. 

Applying for a personal loan at your bank

This option is obviously only available to those banking with traditional high street banks with a bricks and mortar presence. Most alternative banks, offering current accounts and other financial services, do so online.

If you prefer to apply for a loan in person, you will be able to do this by making an appointment at the local branch of your bank. Be prepared to be at the bank for at least 30 minutes. There will be plenty of paperwork to get through and credit spiel to listen to. 

You will need to take the following with you:

Proof of address

You may need two or more of the following:

  • Utility bills
  • Driving license
  • Council tax bill
  • Recent bank or building society statement
  • Credit card statement
  • HMRC letter

Proof of Identity

You may need to supply one or more of the following:

  • Driving license
  • Passport
  • Armed Forces ID Card
  • Other official photo ID

Proof of income

You may need to supply one or more of the following:

  • Payslips
  • Bank statements showing regular income
  • Recent years’ tax returns (for the self-employed)

MOther things to think about before your personal loan application meeting

If you have only lived at your current address for a short period, you will usually need to supply your past addresses, as your lender will require these to perform a thorough credit history check on you. 

It’s important to check your bank’s online loan calculators to help you decide how much you want to apply for. It’s a good idea to only borrow what you really need over a period that is comfortable for you to repay. The more you borrow and the longer you take to pay it off, the more you are likely to pay in interest charges. Having said that, larger loan amounts often carry significantly lower interest charges, so borrowing more can offer a better APR, but will usually still cost you more over the entire life of the loan.

Before your meeting, also have a think about your regular outgoings. You will be asked how much you spend on various things, like rent and mortgage repayments, groceries and bills. It’s sometimes difficult to remember these costs when you’re on the spot, so take a look through your bank statement in advance and work these costs out so you have them to hand. 

When applying for online loans, what will I need?

The number of documents and the amount of information you will be required to provide to an online lender will depend on the type of loan you are applying for and the amount of money you want to borrow. 

When you apply for a personal bank loan online, you will need to provide all the same information as applying in person. The application process usually involves filling in an online form and then sending in documents to support the information you have entered.

Applying for a payday loan online can be a much simpler exercise and you will rarely have to send off masses of documentation to support your application.

Is it quicker to apply for payday loans online?

Yes, applying for an online payday loan or any short-term low-value loan online will usually be relatively quick and simple.

You will be asked for:

  • Personal details to confirm your identity, your age, your address and your nationality.
  • Whether you own your own home or if you are renting and the details of all your regular outgoings and expenses.
  • Bank details so that your funds can be deposited into your account and sometimes to allow for continuous payment authority to be set up
  • Employment details to confirm your employment status and income
  • Details of your payday and how much you are likely to receive

I’ve forgotten my payday loans login, what should I do?

If you are borrowing through a responsible lender, they will usually provide customer service to help you in this type of situation. Just give your lender a call and they should be able to help you log back into the system by asking you some security questions, for example. If you are experiencing issues or have questions regarding your Moneyboat login, contact us and we’ll try and help you as quickly as possible.

 What if I get turned down for a payday loan online?

If you are told that your application for an online payday loan has been turned down, it probably means that you have not met the creditworthiness tests your lender performs. These checks and tests are intended to protect customers by ensuring that they can afford to repay their loan. The checks are required by the Financial Conduct Authority (FCA) and payday lenders who are authorised by the FCA will be unable to provide you with a loan if you do not meet the eligibility requirements they set out on their websites.

Are online loans regulated by the FCA?

Yes, providing you apply for your online loan with a lender who is registered with the FCA, then they will be duty bound to observe responsible lending practices. Lenders who are FCA-authorised will make this clear on their websites and it pays to look for this accreditation before deciding to apply with a particular lender.

Think outside the box…

Check your credit rating in advance

If you take the time to sign up to a credit ratings agency such as Experian, you will be able to take a look at your own credit file before applying for a loan. This is something we can all do to empower ourselves financially. If your credit rating needs work, it’s advisable to take measures to increase it before you apply for credit, as applying and being turned down can lead to further damage to your credit score.

Consider alternatives such as peer to peer lending and crowdfunding

Peer to peer (P2P) lending is the process by which a group of investors, who are usually members of the public, come together to lend money to an individual, through an online peer-to-peer lending platform. Borrowers are able to display their details on these platforms and potential creditors can assess them and decide whether they would like to lend them part of the money they are looking for. The application process for these types of loans may be more convoluted, but it’s always a good idea to keep your mind open when looking for a loan.

Use ‘soft search’ tools

Many online loan providers and banks may offer you the chance to check the likelihood of you being accepted for a loan through a tool using a ‘soft search’ approach. These tools can take a cursory look at your credit report and find loans that might be suitable for you without carrying out a full credit check. These searches can take place without your credit score being affected and are therefore a great way to minimise the risk of being turned down when applying for a loan.

Warning: Late repayments can cause you serious money problems. For help, go to moneyadviceservice.org.uk

Representative Example: Borrow £400 for 4 months, four monthly repayments of £197.48. Total repayment £597.48, interest rate p.a. (fixed) 255.5%. Representative APR 939.5%. Compare Moneyboat loans.

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