How to improve your chances of getting a loan

figures and paper clip

New evidence has emerged that it is becoming increasingly difficult for British consumers to get loans. As financial institutions toughen their lending criteria, even consumers with clean credit ratings are having loan applications turned down. In this article we advise you on how you can increase your chances of having your loan application accepted.

While many banks are denying that they are getting tougher with their lending criteria, there is little doubt that it is now much harder to get a loan.

Successful loan applications made through have fallen from almost 70% in April to just over 50% in October. Add to this the increased cost of loans in recent months and it would seem that the days of cheap and easy credit are at an end.

“Clearly some people who should be offered loans aren’t getting them at the moment. The banks are denying they are getting choosy, but our findings show they are and many deserving Brits are suffering because of it,” says Tim Moss, head of loans at

This, of course, doesn’t mean that you will not be able to get a loan, but you will need to take more care when making your application. You may also have to lower your expectations as to how much you will qualify for.

The first thing you should do, even before you begin applying for a loan, is to check your credit rating. The two main credit reference agencies in the UK are Experian and Equifax.

If you have a clean credit rating you will have more choice and you will be able to borrow more. If not, your choices will be limited and you may have to pay a higher interest rate.

If you do have bad credit you may be best off seeking the help of an independent financial adviser or a good broker who specialises in bad credit loans. These will know which lenders offer the best bad credit products and will have a good idea of how much you will qualify for. It is important that your application is not rejected as this could further damage your credit rating.

If you have credit cards try to pay off the balance before applying for any loan. It is also looks better if you have just one, or at the most two, credit cards.

Also, you should plan ahead as much as possible. If you think you will need a loan in a few months time, make sure that all you make all repayments on time and try to keep your bank balance in the black in the meantime. Most lenders will examine your bank statements for the previous six months when you apply for a loan.

Take a close look at your finances to see how much you can afford to repay. As a general rule, no more than 30% of your monthly income should go towards paying off debts, including your mortgage. If you stay within this limit your chances of getting a loan will be vastly improved.

Finally, take your time when filling out application forms. Make sure you answer all questions and provide all the information required.

“The trouble now is that people with near spotless credit records are finding it difficult to get a loan, or are only being offered one at a higher rate. With Brits facing increasing mortgage payments, petrol prices and winter energy bills, they have less disposable income, meaning in the short-term, things will only get tougher for them,” says Tim Moss.

In the current economic climate, consumers are being urged to save more and borrow less. However, if you must borrow, do your research and only apply for an amount that you are likely to get. And if you want to be on the safe side, go to a broker or financial adviser for help.

One Response

  1. 15th December 2012

Add Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.