This is a list of tips I compiled from pages from an old website of mine. There are wrinkles to getting a loan that the average consumer is simply not aware of.
If this page proves popular, I may tidy it up.
So let’s go!
- Be wary of promises of getting a loan quickly. Many borrowers are told that their loan deal will close within a particular timeframe. They don’t make payments on existing debts, in anticipation of the new loan. After several delays, they go in arrears with their current debts, with no cash coming in from the new loan.Some brokers then order new credit reports, and charge the borrowers higher fees, and a higher rate, because of the delinquent loans, which resulted from delays caused by the broker!
- Make sure you understand and are willing to pay all of the fees listed.
- Beware of statements such as “No cost to you”. Some lending companies will add closing costs to your balance rather than require you to provide cash upfront at closing.
- Watch out for the ‘Deal Of A Lifetime’. When shopping for your loan, watch out for the deal that seems too good to be true. If you you can never speak to an individual, or you have to wait ‘on hold’ for a long time, this speaks badly for the level of service you are likely to get.
- Keep a copy of every cheque you write for your loan.
- If you call your lender about your loan, make sure you get the full name of the person with whom you speak.
- Does pulling your credit report many times damage your credit? Answer: All inquiries for your credit report within a 14-day period will count as one inquiry if you are looking for a loan to refinance your home, a mortgage to purchase a home, a home equity loan, or a car loan. If you are looking for a personal loan or credit card, however, each inquiry will be counted separately.
- UK: Is the lender a member of the Finance Industry Standards Association (FISA)?
- Among the variety of loans available to UK residents, we can mention 2 basic types: secured and unsecured. Secured loans are those whereby you set some of your property as security for the lender. This type of loan security is also known as collateral, and it may come in different forms but the most usual type is property, making it possible to have more than one loan secured on the same property. On the other hand, unsecured loans do not require any property to be set against them but they incur higher interest rates and it’s necessary to have a good credit record to obtain a loan of this type. Personal loans are useful when you need to cover certain expenses or you need to make important purchases. Amounts that lenders borrow for range between £1,000 to £100,000 usually.
- The total cost of your loan will depend on the annualised percentage rate (APR). The annualised percentage amount takes into account the interest and all those charges associated with the loan, including the arrangement fees.
- The lower the annual percentage rate the less loan costs will be. Interests on loans are charged in one of two ways, as either a fixed or variable rate. Fixed interest rate is guaranteed for the whole term of the loan and it will not be subject to market fluctuations. The variable interest rate is usually lower than fixed interest rates in the beginning; however they do not offer the security of a fixed interest rate, incorporating a risk element into your finances.
- Top lending companies are subsidiaries of the clearing banks and they may negotiate competitive rates.
- Be sure to ask your lender about early repayment, since many of them will charge a fee if you decide to pay off your loan earlier than expected.
- No matter how cheap your loan may be, pay it off as quickly as you can to avoid undue interest accruing. However, it is important not to overstretch yourself. Leave a portion of your regular monthly income aside as coverage for emergencies and unexpected bills.
- Variable interest loan rates may seem a better deal at first glance, but can be subject to rapid increase, while fixed interest rates might start off at a slightly higher percentage but offer more security.
- The Consumer Credit Act of 1974 guarantees that consumers have access to objective information about lenders. APR must legally be calculated in compliance with this regulation and must include not only the interest rate but also any additional fees.
- If you are having problems with your loan, inform your lender as soon as possible. The earlier you tell them, the more sympathetic they will be.
- Any concerns regarding the standing or history of a broker must be checked out on the Consumer Credit Register, where there is information available on every trader that has a license or has ever applied for one. To make an enquiry call the Office of Fair Trading, phone: 020 7211-8608.
- Before seeking loan, sit down and begin doing some budgeting. Get paper and pen ready, and make a complete list of your expenses. That way, you will have an exact idea of how much you can afford to pay.
- Dedicated lending companies are often more convenient and less restrictive than banks. This is because banks earn cash by a number of different means, as opposed to online lenders, whose primary income is from the money they lend.
- If your job allows you to increase your income in certain periods, look for loan that let you pay back early. That way, if you double your average income on a certain month, you can pay double that month, making the overall repayment time smaller.
- Make sure they’re not looking up your credit rating when they give you a quote. Your credit record will show any applications you have made, so it makes sense not to apply for several loans at the same time.
- Start with banks and well known credit unions These are large lenders with solid reputations, so being scammed will not be an issue.
- Do a budget. Make sure you use realistic figures. Keep all of your receipts, or keep a record, for all of the cash that you spend for a month.
- Phrases that you may come across:
– APR, an acronym for “annualised percentage rate”, the amount of interest charged on your loan plus additional fees and charges.
– Arrears, a term used to describe the amount that a borrower is behind in their agreed repayment plan, measured by either cash or time.
– Security, term used to describe assets or property put up as security for a loan. The lender will be entitled to reclaim the assets as compensation if repayments are not kept up.
– Fixed interest rate, the type of interest that remains the same throughout the term of the loan.
– Overpay, a term that describes the making of payments over and above those outlined by the loan repayment plan.
– Secured, a type of loan that requires property or a security to be put up against the loan.
– Term, the length of time over which you agree to repay your loan.
- Improve your credit-rating. Find out what it is at Equifax, Experian and Trans Union. lenders may access them all. Then do the following:Make sure you are on the electoral register. Satisfy liens and public judgements, such as in the County Court (CCJs). Correct errors, including erasing judgements older than seven years. Paid-off debts can be legitimately recorded up to seven years after settlement.
Add information showing stability:
– Current employment, employer’s name and address and your job title.
– Previous employment, if you’ve had your current job less than two years.
– Current residence, and if you own it.
– Previous residence if you’ve been at your current place under two years.
– Date of birth.Avoid unnecesssary enquiries or shopping around for credit or loans. Multiple accesses by lenders of your credit report can indicate that you need many lines of credit. This looks like you are desperate for cash, or trying to commit fraud.Close unneeded accounts. Close them off slowly, not all at once. Keep only two credit cards.Pay off credit cards. Keep balances low, and paid off on time.Keep your debt low; below 75% of available credit.Build a good payment history. Pay your bills on time!
Open a savings account at your bank.
- Avoid specialist consolidation companies. These can get you into more trouble. Negotiate yourself with your creditors, and get any agreements in writing!
- How can YOU get the BEST deals on loans? Answer:- Do some research.– Get written quotes from four lenders.- Improve your credit rating.+ Don’t just pick a lender out of a newspaper. Ask friends. Use the internet!
+ Verbal quotes are not worth the paper they’re printed on; get them in writing, and get more than one.+ You can improve your loan credit rating by only having one or two credit-cards, for example, and paying them off on time. Get rid of lines of credit you don’t need.
+ The smaller you can make your loan, the better. Loans, like credit-cards, are an expensive way to get cash. If you can beg or borrow from friends or relatives to bulk up your cash-at-hand, do so. You’ll feel a lot happier if you’re only repaying a few hundred, rather than a grand, a month.
- The lender you ultimately apply to will need at least your:
- Name;
- Address (with post code);
- Time at that address;
- Amount you want to borrow;
- Employment (how long in your current job);
- If you have a bank account (and how long you’ve had it).
You may have to get used to the idea of getting cold calls from other lenders for weeks or months afterwards. Try to stop this by telling the initial broker “Please do not sell or pass my personal data on to other lenders. Thank you.”
- Don’t take on a loan thinking “Well, I can always go bankrupt if I get into difficulties”. This is folly. If you go bankrupt, it will be entered in the records of the County Court, and you will find it very difficult, if not impossible, to get credit of any kind in the future, except at usurious rates. Also, the lender you owe the cash to will make an entry into your credit record. Credit referencing agencies make it their business to sift County Court records, to keep their databases up to date. You will have shown you can’t be trusted to pay back a loan, therefore why should any lender, hire-purchase company or credit card provider take a chance on you?
- You can improve your credit-worthiness by:
- Staying in one place for two years or more;
- Your house or flat not having had previous occupiers with bad credit;
- Being on the electoral register;
- Having a credit card or store card;
- Paying off your credit-cards, store cards and Blockbuster video rentals* regularly;
- Getting black marks removed from your credit report. Go to Experian, CallCredit and Equifax;
- Paying your bills before the due date;
- Having the same bank account for two years or more;
- Being in credit on your bank account (no overdraft, no unauthorised overdrafts);
- Having £50,000 in the bank already!
- Owning property.
- If you’re looking for loan, a secured one is much easier to get than an unsecured one. A secure one is secured against your house; valuable property. Unsecured means they take a look at your credit status, and give you an APR based on it. Secured loans are so desirable, and easier for a broker to ‘place’, versus unsecured ones, that many lenders say ‘no tenants’; they don’t want the hassle of dealing with what are often near-charity cases. Lending is a business; a few bad deals and you’re out of the game.
- Alternatives: What do you want? Money. How does one get more money? By:
- Getting a second job or paying hobby;
- Getting a different job that pays better;
- By scrounging from friends or family;
- By selling an unnecessary asset, like a flash car;
- By saving what you’ve already got – no holiday, give up cigarettes and booze for a while!
It’s a small amount of initial hardship, versus years of fretting over barely-manageable monthly payments. Money and sex problems are two things that put a real strain on a marriage or partnership. The second is easy to fix, and the first not too hard either! An extra hundred quid in your pocket per month can make all the difference.
An internet loan site should be checked for:
- Has it got a registered company name?;
- Has it got a registered office?;
- Has it got a street address, rather than a P.O. box?;
- Has it got a telephone number?;
- How long has the lender been in business?;
- How quick are they to respond to queries?;
- How far away are they from you physically?;
- Are lender personnel mentioned by name on the site?
Once you’ve settled on a few lending companies, you can enter their business name in a search engine with the words ‘problem’ or ‘scam’, and see what comes up.
- Overpay your loan if you can do so without penalty, especially if your payments are re-calculated week-to-week or month-to-month. This means you will incur much less interest over time, and get peace of mind sooner. Get your outstanding loan amount down, and get on with the fun things in life.
- If you have several small loans with different lenders then you can combine them all into one monthly repayment. The easiest way is to take out a debt consolidation loan. You end up making one monthly repayment to one lender. The downside is that this will show up on your credit report, and the consolidation lender may be incompetent.A better way is to take out a cheap loan to pay off more expensive ones, such as credit card debts.
- A secured loan means you put your home up as collateral. This allows you to borrow more cash than an unsecured one and the rate of interest should be lower. If you get an unsecured loan then this is seen as riskier to the broker and therefore has a higher rate of interest. It also offers a lower amount of money, and over a shorter period of time. The restrictions are tougher also for this type of loan, meaning that you can’t just do whatever you like with the cash.
- If you only pay the minimum repayment due every month you can’t hope to get out of debt.
- Fill out the form as completely as possible. A slight difference in income or employment dates can reduce your interest rate.
- If applying over the internet, you shouldn’t have to pay processing fees, as there is little manual labour involved. You can save lot of time and cash in the approval process.
- You need to know how much of a loan you can afford. Don’t rely on the lender; find out yourself. When a broker approves or disapproves a loan, they do so based on credit scores, risk factors, and other data-driven elements. They don’t consider how the loan will affect your life. Use an online loan calculator. This will help you determine your loan “comfort zone”
- Some crooked ‘lenders’ use the Internet to take advantage of consumers. This can lead to identity theft or passing your details onto umpteen other companies. Always make sure you are using a trusted, well-known lender. Most will only ask you for some preliminary information regarding your income, debt, etc. They do this for basic screening; they want to make sure you’re reasonably qualified for a loan before spending more time and cash processing you. By providing only basic information initially, you can find out if the lender will touch you. You can avoid filling out a full loan application for a lender who can’t help you. This will also limit the number of credit enquiries made by lenders. If you have too many, it can send up a red flag to other lenders that you’re having trouble being approved.
- It’s important that you get everything in writing. This is good financial practice in general but it’s especially important with large financial transactions. For example, if a lender promises you a certain interest rate based on your qualification and credit score, ask them for it in writing.
- You may not even be aware that you have a credit score, but if you’ve ever applied for a loan, a car loan or anything which is ‘buy now, pay later’, it’s likely that your credit score has been checked. A credit score is a risk-assessment carried out by a lender to see what the likelihood is of you paying off your debt. It is a mathematical formula that compares your bill-paying history with the histories of millions of other people. It will compare your credit history, your debts, the length of your credit history, new loans and other criteria. The resulting figure tells lender whether you are a good or bad risk on paper. If yours is good, you get good rates of interest. If you have a poor score, you will find it harder to qualify for certain offers and interest rates offered are likely to be higher. Basically, the higher your credit score, the more desirable you are to a lender.
- Roughly 35% of your credit score is determined by your bill-paying history: late payments, bankruptcy, late collections etc, can all give you a low credit rating. It is generally checked over a two-year period and it is the more recent debts that carry the most weight. Lenders also take into account your income and your potential earnings in the future. Someone with a poor credit score may find themselves being refused a loan. An adverse credit rating can make it harder to refinance – especially if your credit score is lowered by defaulting on payments to your current lender.
- It is possible to improve and recover from a low credit score. By managing finances carefully, you can accumulate ‘points’, making loans more viable. Ensure repayments are met on time. If you are having trouble with your bills, tell your creditors. Don’t leave it until the payment is due. Lenders view people who owe smaller amounts on many credit facilities as being a lower risk than those who owe large amounts on fewer.
- Credit History – there are several lenders that may lend you cash even if you have bad credit, but they may penalise you with high interest rates.Compare Rates – rates vary and there is no sense spending a penny more than you have to so get several quotes.Transfer Balances – be sure to look for hidden fees and transfer balances that my not be apparent at first glance.Required Information – lenders will require your financial information such as whether you own or rent a home, how much cash you own on credit cards, etc.Pre-Payment Penalties – if such a penalty is built into the loan contract, the lender will penalise you, by charging a fee, if you pay the loan off early.
- How much of a monthly installment can you afford? The repayment installment should not exceed more than 20% of income remaining after meeting all the necessary expenses of the month. With a written budget, one knows one’s limit, which helps one to choose the most suitable deal.
- One advantage of shortening the loan term is the ability to repay the loan quicker. The longer the term (repayment time), the more expensive it is.
- Penalty fees – the client must beware a lender who charges a penalty for pre-payment before the agreed term.
- Be careful when selecting the lender. Always go for lenders with good market reputations and lots of happy clients.
- Seek professional advice from an expert and also your friends and colleagues.
- Don’t rush. You might miss loan benefits and discount schemes.
- The rule is: never borrow more than you need. As a loan borrower, you’re not required to take the full amount of the loan you’ve been offered.
- Don’t forget about earning money as an alternative to borrowing. Even though working at an (extra) job can seem like a burden, so is struggling with high loan repayments.
- The key to a successful loan application is to follow the instructions carefully. Note that any mistakes you make will delay receipt of your funds.
- If you already figured out the exact amount you need before the borrowing process begins, start keeping track of your monthly and yearly outgoings. Also, there are free calculators out there than can work out the amortisation of your loan.
- Always Try To Clear The Balance Of You Credit Cards Every Month. Better yet: Stop Using Your Credit Cards. Many people pay off a credit card debt every month and then use it again to the limit. You will never clear your debt this way.
- Reduce the Interest You Have To Pay. If you have a good credit rating then you should shop around and get a card offering 0% on balance transfers and 0 upfront fees. for the longest period possible and keep doing this at the end of any interest free period. BUT: lenders are wise to the phenomenon of ‘rate-tarts’, so you might have trouble doing this.
- If you are really struggling with making loan repayments then contact the lender as soon as possible. It’s possible to come to a repayment arrangement with reduced interest terms for a short period.
- It’s not unusual to find lenders that will encourage you to sign up for a loan by lowering your interest rate, which, unfortunately, can increase dramatically later on. This is called a ‘honeymoon’ interest rate. If you aren’t prepared for the increase, you may find it very difficult to pay off your loan.
- Know truly how badly you need the cash. The thought of badly needing cash can sometimes be enough to push you to settle for poor-quality loans. However, you have to remember that this is still a debt that you need to pay for a set length of time. Perhaps you can look for a way to increase your income so you no longer need a loan.
- Assess your options. If you shop around for different options for your loan, you will discover that there are loads of them. All of them have their own pros and cons. Those that can offer lower interest may have longer loan terms, while those with shorter payment terms may attract much higher interest rates. What you can do is to check where you will be able to save more cash, which you can use to pay other immediate bills that you incur.
- Identify hidden fees related to your loan. The last thing you want to happen is to be surprised by charges that you don’t even know exist.
- Go through your credit reports in detail.
- Do the calculations yourself. Don’t just leave it to the broker. You decide which plan(s) suit your needs.
- There are a lot of bad lenders out there. Consider online lending companies for your quote because they are going to search multiple lenders for you and find the best one for your situation.
- Once you have a quote and you are sure you can get approved, then take your quote to another lender and your local bank. They may surprise you and will match or beat your quote in order to keep your business. Trying a second lender will guarantee you are getting the best loan deal possible for your circumstances.
- Get a copy of your credit report. You should get a fresh copy annually to ensure that there are no errors even if you are certain you have good credit. If you do find a mistake be sure to contact the credit bureau(s) right away by post to request the entry be corrected. You should also contact the creditor that supplied the incorrect information to the credit reporting lenders as well.
- You are able to dispute errors on your credit report. However the items have to be factual errors. If there is a debt listed on your credit report, and it hasn’t been paid off, you can’t dispute it. Pay off your debts, starting with the one with the highest interest rate and moving downward.
- If the debts you hold are just too overwhelming then get assistance from a credit counsellor (preferably a non-profit one) ASAP. They will help you work out a repayment plan, or a debt consolidation agreement. It’s not the most pleasant choice when trying to improve bad credit, because it prolongs your poor credit rating, but it’s the safest way to do it.
- Any credit cards, charge cards, or ‘purchase now pay later’ cards that you don’t need; get rid of them, but keep the oldest one, for the credit history attached to it. Don’t be the fool who consolidates their debt only to rack it back up again while they’re still paying off their loan.
- Ensure you pay off your loans and other outstanding debts as quickly as possible. Use spare cash to pay extra on debts if available, and stay up to date with loans, rent and bill payments.
- Make use of the cut-throat competition in the finance industry. With so many lenders looking for business, you can get a quick cash advance online.
- Some lenders may give you reduced interest rates for early clearance of the amount borrowed.
- Have the loan deposited in your account at the very last day before you need to use the cash. It’s unwise to borrow money and then let it accrue interest whilst in your bank account.
- Also, never borrow more than the minimum that you need! Just a few hundred quid extra could cost you half as much again over the term of the loan!
- You will never know what unexpected expenses could arise so it’s best to have a backup for financial emergencies i.e. some cash in hand. Don’t run on empty!
- Use cash as much as you can. Avoid using your debit card when you have cash with you. Use your credit cards or write cheques only in emergencies. Having debit cards, credit cards and cheques to hand might lead you to overspend.
- Keeping busy will let your mind wander and help you stay away from things that you are likely to spend cash on when you get bored. Examples of these are snacks, film tickets or video rentals. You’ll be surprised at the amount of cash you’ll save by spending less on luxury items, following your budget plan and saving for financial emergencies.
- Here are some bogus offers that are often aimed at the ignorant client: promises to fix your credit problems, low cost loan, magazine subscriptions, low cost home repair, special car deals, low-interest credit cards, deals that let you miss credit card payments, job opportunities, risk-free investments and free travel.
- Say no to credit insurance offers. These are often attached to loans. It’s just another way of squeezing more cash out of you. They benefit the lender, not you.
- There is no universal three-day cooling-off period. Don’t be fooled into believing that you automatically have three days to cancel a purchase. Only a few types of contracts give you a right to cancel. Most governments go by the “caveat emptor” rule. They don’t have enough people to police all transactions. The buyer must take some responsibility for the purchase.
- Think twice before sharing personal information. Don’t give it out unless you know the client or lender is above board.
- Don’t buy under stress. Don’t be talked into quick-fix deals. Try to avoid making big-ticket loan purchases during times of duress.
- Quit that smoking habit. If you smoke a packet of cigarettes a day, it’s costing you a ton of cash a year. Quit smoking, and put the daily savings aside and put it towards your loan. Look for other costly habits that you can quit and apply the savings to your loan.
I hope these few simple suggestions will assist you in getting a handy loan quickly.