Frequently asked questions

Below you'll find answers to the questions we get asked the most about applying for finance.

All loans

The entire application for a loan including the initial phone call, approval and processing time can take anywhere from days to weeks.

As all loan companies are regulated by the Financial Conduct Authority (FCA), applications are subject to rules like a consideration process of up to 16 days.

Completion time is dependent on your individual circumstances, the lender you choose, the documentation that’s required, and how quickly you can get those documents sent. The quicker everything is done, the sooner your loan can be processed. To help speed things up, make sure the details you supply us with are completely accurate.

The time it takes to receive the money for an unsecured loan varies from lender to lender. Usually, once you’ve been accepted for a loan over the phone, you will be sent paperwork you’ll need to complete within five days of first being accepted. Once the lender has received your paperwork, if they do decide to lend to you, there’s a chance the funds can be transferred into your bank account the very same day.

If you’ve applied for a secured loan that’s tied to your house, the process can take a little longer –typically four to five weeks. This is because the lender must first carry out a search of the Land Registry to check vital pieces of information such as who owns the property, whether anyone has a legal interest in the property, restrictions on land, whether the property is freehold or leasehold etc.

A secured lender also needs to obtain information from your mortgage company to carry out a valuation on the property. They will also need proof of identity and income before agreeing to move forward with the loan.

Typical APR % (Annual Percentage Rate) is used by lenders so you can easily compare rates before you apply for a loan. Lenders use the term to describe the amount of interest you’ll pay annually on money you want to borrow. Typical APR %must reflect at least 66% of secured loan business expected to result from advertising the rate.

Representative APR % is used for loan advertisements to help borrowers understand the true cost of borrowing and how the credit rate might compare to other lenders. Representative APR % must reflect at least 51% of unsecured/personal loan business expected to result from the advertisement.

When comparing representative APR % across different lenders, don’t forget to read the small print as these headline rates may only apply to those applicants with good credit ratings. Always compare rates for loan options that are suited to your individual circumstances and that you are likely to be eligible for.

You’re free to use your loan as you’d like but the type of loan you take out can determine what you spend the money on because of the maximum amount the loan allows you to borrow.

The borrowing cap on a secured loan is usually much larger than an unsecured loan. Popular ways to spend a secured loan include large-scale home improvements, legal purposes, and debt consolidation. Unsecured loans, on the other hand, have a much smaller loan limit and are better suited to smaller value purchases such as small, essential home improvements and vital car repairs.

You might find lenders will allow people between the ages of 18 and 80 to take a loan with them, however, this can vary. Each lender will work to their own unique set of criteria and impose different upper and lower age thresholds, so it’s worth shopping around to find one that suits you.

These thresholds exist because lenders tend to be cautious. Either because younger individuals might not have had enough time or life experience to build up a substantial credit profile, or because there’s a chance older applicants might have opened up a bank account or mortgage before credit reference data existed.

In either case it’s difficult for lenders to build up a credit file based on the limited repayment information they have available.

Yes, you can pay off a loan earlier if you can afford to. The benefit of this is that it can help save you money in interest repayments in the long-run. However, paying off a loan earlier than expected may also incur an early repayment charge, or something similar. How much this charge is and how it works can vary from lender to lender, but you might find it’s approximately the equivalent to one or two months’ loan interest. It’s probably best to check with the individual loan company.

Redemption fees are simply another term for early repayment charges. This is the charge incurred should you decide to repay the loan earlier than the original repayment term stated.

Lenders do this as a way to compensate the money they’ll lose out in interest payments. A typical penalty amount is approximately the equivalent to one or two months’ loan interest. You might also find that the lender agrees to lower the early repayment charges towards the end of the term. If you are considering repaying your loan back early, it’s advisable to calculate whether it’s worth paying the loan back earlier or not.

Not all loans are subject to an early repayment charge. Always check with the lender first.

A guarantor loan is a type of unsecured loan where someone else, usually a friend or family member, agrees to pay the loan if you can’t afford to make the repayments. They must co-sign the credit agreement in order for the loan to be accepted. This means that if you fall behind with payments, the lender can ask the guarantor to make the repayments instead.

If your application for an unsecured loan has been rejected due to a poor credit score, this an option you could take. However, you must be confident knowing you can repay the loan back as it could have knock-on effects for friends and family members.

Yes, the lender can turn you down for a loan. When you apply for a loan, it’s up to the lender to decide whether they want to lend to you. The lender will calculate your credit score using details from your credit report as well as your application form. They will also assess you against their own unique criteria to work out whether they trust you to pay the loan back or not.

Each lender calculates the score differently. People may get turned down because of reasons such as the following: their credit history is limited, their credit profiles flag up that they’ve had trouble repaying debts in the past, or their file shows a number of ‘search footprints’ from applying for loans in the past and the lender interprets that as making it riskier to lend to them.

Secured loans are used to borrow large sums of money against something you own and are usually used for major expenses, such as large-scale house improvements or debt consolidation. Just like the name suggests, ‘secured’ means that a lender will request to secure the loan against a major asset. They do this as a form of security in case you are unable to pay them back.

This might be your house and means that you agree if you are unable to pay the money, you will sell your house to repay the debts owed. Likewise, if you used your car as an asset it may be repossessed if you don’t keep up payments.

Lenders see secured loans as lower risk because they can collect the money you owe from your assets if you fail to make the repayments. Because of this security element, they usually come with favourable interest rates and lengthy repayment terms, meaning lower monthly repayments compared to unsecured loans.

Unsecured loans, on the other hand, are not secured against anything. They are usually lower value personal loans used to pay for smaller expenses, such as car repairs. If you don’t make repayments, it will show on your credit score. The downside of this is that a bad credit score may lead to you having difficulties lending again in the future.

The main difference between the two loans is that secured loans are normally cheaper than unsecured loans because they are seen as less risky by lenders. However, secured loans are riskier for you because there is the chance the lender can repossess your home if you don’t keep up the payments. Secured loans also come with much longer repayment terms, typically over several years compared to as little as a few months with unsecured lending.

Bad credit

Missing payments on things like short-term loans and credit cards will affect your credit rating. If you fail to follow the terms and conditions set out in any credit agreement, it will be documented on your credit report and may result in a bad credit score.

Getting bad credit can be caused by a number of factors. Typical reasons might include: making late loan repayments, missing repayments entirely, having bankruptcy against your name, or having a County Court Judgement filed against you. Making the minimum repayment on your credit card can also affect your credit score.

If you find yourself in a situation where you think you can’t manage your repayments, it’s important to let your lender know as soon as possible.

It can be difficult to get a loan if you have a bad credit rating because lenders will be wary of whether you’ll be able to make repayments. However, just because one lender turns you down doesn’t mean that another one will.

The first step is to try and rebuild your credit score to prove to lenders that you can be trusted as a responsible borrower. If you are eligible to take out a credit card, you could prove your credit worthiness by spending on the card each month and then paying it off in full to avoid interest.

Some credit cards have been specifically designed for those people with a bad credit history and there are also loans suited to those with bad credit too. Prove you’re a worthy borrower by making the repayments on time.

Secured loans

Applying to take out a secured loan against a property can require large amounts of paperwork. This can extend the time it takes to receive the money from the loan, however, it can still be completed relatively quickly if you can provide all the information accurately and efficiently.

After a secured loan application has been made, you will normally receive a quotation that’s subject to validation and confirmation. If you decide to take the next step, then your credit report will be assessed.

You may be asked to provide evidence of your income such as payslips or accounts. If the loan you want is secured against your house, rather than another asset such as your car, the lender will want to confirm that the amount of equity you have in your home covers the amount of the loan.

To do this, the house must be formally valued, and confirmation of your existing mortgage debt must be provided. The lender will also need to determine if any other party has legal hold over the property, and to attach their own claim to the deeds.

This process varies from lender to lender but can take several weeks. You could ask the potential secured loan lender for a time estimate at the point of application.

If you’ve taken out a loan on your house but you’re moving, you might be worried that you can’t put it up for sale until the loan is repaid.

Although the secured loan doesn’t have to be fully paid off, you will need to agree to repay it when you move. There are two options, the first option could be to see if you have enough money from the house sale to repay the debt in one go. The second option is to transfer the loan to the next house. It’s important to note the lender may charge you a fee for this and that not all lenders will allow it.

It’s also worth bearing in mind that taking out a personal loan could affect your mortgage application and result in you being charged higher interest rates. If you are unsure of the next steps, you may want to seek some independent financial advice.

Sources:
https://www.moneyadviceservice.org.uk/en/articles/secured-and-unsecured-borrowing-explained
https://www.moneysavingexpert.com/loans/secured-loans
https://www.zoopla.co.uk/discover/buying/secured-loans-guide

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