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How to Prepare for a Loan Application

There has recently been a renewed interest in lending by all major lending companies like banks and other financers. This is due to a better than expected financial confidence that has been observed in the market after recent economic fluctuations. A British economy spurred on by the real estate sector and a surge in small businesses has managed to keep the general spending going in the country. This has, in turn encouraged banks to approve more applications to small borrowers, whether for personal loans or for small and medium business enterprises (SMEs) looking to establish their ventures.

However, even in this renewed lending compliant atmosphere, the criteria of loan approvals remain stringent. The government owned, British Business Bank has recently published a report that showed that apart from the increase in approvals from traditional lending sources, such as banks, there has been a surge in personal lending as well from other lenders. This has widened the type of information that is considered by an individual lender and as a result, the criteria for approval could be vastly different from one financing company to another. For example, the credit screening for a secured personal loan like a mortgage is far more stringent than that of an unsecured personal loan. The criteria could still vary greatly between lenders for a similar amount for a personal loan. It has, therefore become increasingly important to prepare adequately before taking out a loan as it could potentially save the borrower hundreds of pounds over the course of the agreement.

This article would skim the surface of some common types of loans and examine the approval criteria that are generally associated with them.

Unsecured Loans

According to a recent study conducted by a major online lender in the U.K., unsecured loans form the most common type of lending taking place in the country. These loans, as their name suggests are not secured against any physical asset of the borrower and is determined by the lender on the basis of the eligibility of their client. This eligibility is based on the criteria established by the lender with the primary objective to ensure recovery of the amount lent. Some lenders offer finance options that don’t require comprehensive background credit checks, however, this is reflected in their higher interest rates. These types of loans are meant for certain borrowers in certain circumstances.

Another personal unsecured loan that is extensively common across the U.K. is the use credit cards. The U.K. is the biggest credit card market in the European Union with more than 94 million activated cards. The interest rate of using credit cards varies from borrower to lender and any promotional campaign that might be offered.
Before filling out the application for any unsecured loan, a borrower must look out for the arrangement fees. If there are any, it could raise either the initial payment, loan premiums or final payments making it overall far more expensive. In the U.K., any arrangement fees are required to be included in the APR under the EU laws. This presents a clearer picture of what would be owed in total to the lending company.

Continuing the current lending compliant atmosphere in the country, the average credit card interest has seen a slight drop to 10.56 per cent according to recent figures. This does not include the promotional programmes run by credit card issuing companies for new customers. New customers are therefore, far better off by searching and comparing all the different promotional offers associated with new accounts.

Whichever loan option selected by the borrower, it is necessary to correctly analyse that it is the most appropriate one to their respective needs.

Secured Loans

Secured loans forms the most amount of credit taken out by the British public. This type of loan, as the name suggests, is secured against an asset like a house or a car. If repayments are not made and the financial agreement falls through, it is possible for the lending company to extract its finances via the asset.

According to Financial Conduct Authority of the U.K., the onus is on the lender to make sure they have done all they can to check the ability of the borrower that they can make repayments on their finance for a mortgage. As with most secured loans, the mortgage interest rates are generally low and are stretched over a number of years (20+ years on average). The borrower would have to make certain that they are able to meet the stress test of a financer and have the means to makes consistent repayments.

Lenders would be primarily looking at affordability, then at the money management capabilities of the borrower. If a borrower shows maturity and foresight with regards to spending expenses, that would act as a definite plus in the eyes of the financial assessors.

How to Get the Best Deals on Car Finance Loans

If you find yourself in a position wherein you need to purchase a new car, the chances are you won’t have all the cash you need for such a large-ticket item simply sitting in your bank account. For people who simply can’t afford the costs of a new vehicle upfront, there’s an opportunity to take out a very specific kind of loan – known as car finance.

When you consider taking out car finance, it’s important to make sure that you don’t fall into the trap of paying more than you need to. After all, as with any other loan, it makes sense to shop around and ensure that you’re getting the best deal for your needs. Buying a new car is a massive financial commitment for most people, but it can be less expensive than you think with the right financing and loan solutions. Below we’ll look at some of the things that you will need to consider if you want to make sure that you are getting the most valuable deal on your car finance loan.

Know How to Get a Cheap Car Loan

One of the biggest problems that consumers have when it comes to getting the best deal on their car finance loans, is that they don’t look around before they agree to a financing option. Unfortunately, this is often a very expensive mistake, because you could end up paying a lot more than you really need to.

It’s important to remember that the best deals on unsecured personal loans for car payments are generally only available to people who have particularly good credit histories. This means that if you don’t have a good credit rating, or there are some poor marks on your financial history, you might not be able to get your hands on the best deal when it comes to paying a small amount of interest on your car. However, it’s still a good idea to shop around, as there are quite a number of great deals out there. Just remember to check your credit report before you start applying.

A good thing to keep in mind is that while some vehicle dealers will offer a 0% finance deal on new cars, these deals can come with a pretty hefty deposit. If you have a lot to put down on a deposit, then you should consider looking for 0% options.

Important tips to Remember

Sometimes, it’s good to ensure that you’re going into the process of purchasing a car with as much foresight and planning as possible. Having the money ready to go before you start hunting for a car will help to strengthen your bargaining power, for example, because you will be able to make the purchase immediately.

When you are looking at car dealership financing, make sure that you carefully think about the size of the deposit that you have, and the final payment that you will need to pay, as well as the monthly repayments you will be expected to make. Remember that all of these things can seriously ramp up your overall costs. Leasing deals can sometimes work out as cheaper for certain people, as consumers may not have to pay for repairs and servicing – things that can end up costing quite a lot for the average car owner. What’s more, leasing is often the next best solution for customers who have bad credit scores – because they don’t actually have to buy the vehicle.

Haggling for a Good Price

As with any kind of loan, the best thing you can do to make sure that you get a great price with the lowest possible interest rates, is to shop around and see what’s available in your local area. Sometimes the most obvious option for finance will not be the least expensive, and sometimes the least expensive solution might not offer all of the added extras that you need for peace of mind.

Make sure that you look on comparison websites, and check out personal loan options as well as going through dealers for financing options. It’s also worth considering used cars that have already been registered by dealers. Usually, these vehicles will only have a small number of miles on the clock, which means that you end up getting a vehicle that is almost brand new, for a price that is similar to purchasing a second-hand car.

You may even find that if you have a bigger deposit to put down on your car, or you already have the finance in hand when you go to your dealer, you will be able to haggle the price down a little further. If not, remember to ask about the free extras that you could be able to get your hands on, such as service packages and extended warranties.

Are There Alternatives to Payday Loans?

When you only need a small amount of cash to tide you over for a short amount of time, you may be tempted to consider the benefits of a payday loan. Unfortunately, although the amount of interest that is allowed to be charged each day on a payday loan has now been decreased by the financial conduct authority, these types of lending agreements are often criticised for their huge repayments. What’s more, payday loan companies are frequently criticised for rolling loans multiple times, costing borrowers far more in interest charges.

The government throughout the UK, as well as various financial and consumer bodies have expressed some concern that payday loans are often not the best solution for people with money problems. Your best bet is to consider what alternative options might be available to you on today’s market. Remember, there are a range of lending opportunities out there to consider.

Credit Union Loans

Across the country, many credit union loans are regarded as the perfect alternative to people in need of payday loans. These credit union loans offer a small interest rate, and most credit unions are willing to offer credit to people who have been refused by major lenders and banks. There are a range of different types of credit union out there today, and many will have specific criteria that you will need to meet for your application to be successful.

There are also credit unions available to people who are living in specific locations, working within certain industries, or are part of a particular organisation or group. Certain people will find that they need to have some amount of money invested in a credit union – usually in some form of savings account before they are able to benefit from a short-term loan. However, as new options emerge across the country, there are solutions out there for people who do not have existing credit union accounts.

Your best bet is generally to check the criteria that has been posted surrounding the loan before you attempt to apply for it. However, you may find that you have to wait for a long time for your credit union application to be addressed.

Employer Cash Advances and Borrowing from Family /Friends

One alternative to getting a payday loan is to simply approach your boss and let them know about your current situation. If you find that you need some extra money to tide you over until your next pay because of a sudden emergency in your life – such as a sudden breakdown or medical mill, you may find that your employer is willing to help. In some cases, employers will be willing to give you a small amount of your wages for the next month in advance, and this simply means that you’ll get less the next time you are paid.

The biggest benefit of getting an employer advance is that you won’t need to pay for any administration or interest costs. Of course, many people struggle to feel comfortable when asking for a cash advance from an employer. However, if you have already built a good relationship with your employer over time then you might find that it’s easier to ask them whether you can borrow money. A cash advance can help you to avoid getting into debt with huge interest repayments.

In some cases, a really good employer might even allow you to repay the money that you owe on your cash advance over a period of several months. On the other hand, they may ask you to do some extra overtime in order to cover the amount you owe.

Alternatively, if you can’t borrow money from your employer for whatever reason, there’s always the option to turn to friends and family. Much of the time, if your friends and family have the money to help you out, they will be willing to do so – as long as the situation isn’t a regularly-occurring one.

However, you should be careful if you are considering borrowing money from family or friends, as failure to repay this money on time could mean that you end up losing important relationships. Make sure that you keep track of payments and do your best to avoid arguments wherever possible.

Authorised Overdrafts

Finally, one particularly useful alternative to a payday loan is an authorised overdraft. These overdrafts are when you can borrow a little extra cash through your bank account by simply dipping into a negative bank balance. Most overdrafts are only available up until a certain point, and you will usually be charged interest or have to pay a daily set fee for using that overdraft. This can mean that in some cases credit cards can be a cheaper option.

However, if you have a bank account that offers a 0% overdraft then you might be able to borrow the extra money you need for free. Just make sure that your overdraft has already been authorised with your bank provider. Don’t simply assume that you can dip into the negatives without asking, as an un-authorised overdraft can cost you a lot in terms of interest and fines.