Online loans
Comparing loans online can be the best way to find the right option for you.
A loan can be a useful way of getting financial help when you need it. With so many options available, finding one that suits you can be hard. But by comparing loans online, you can find the best option that works for you. To find the right loan, consider choosing how much you’d like to borrow and for how long for before applying.
Here, we’ll tell you all you need to know about online loans.
Applying for an online loan
If you’re thinking of applying for a loan, there are some important things you need to know. In the UK, each lender will have their own set of criteria before they can consider lending to you. This can vary, but as a minimum, you’ll need to:
- Be over 18
- Be a UK resident
- Not be legally prevented from borrowing
If you can meet these conditions, lenders will then look at your credit history and current financial situation. Using this info, they’ll decide if they’ll lend to you or not. Having a good credit score can improve your chances of getting approved.
If the lender feels you’re a risk or you don’t meet their affordability criteria, your application may not be successful. If you do get approved and you have a poor credit history, they could charge higher interest rates.
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Check if you’re eligible for a loan through our partner Aro. As a leading credit broker, Aro works to offer loans at fair rates.
Features of an online loan
When you apply for a loan, the whole process can often be completed online (depending on the lender). This means you can apply whenever it suits you 24/7. Some lenders may offer you an instant decision on your application. In some cases, this means you could have the money in your account the same day if approved.
If successful, you’ll need to provide your bank details. The lender will then be able to pay the money directly into your account. Payments will automatically be taken from this account on the agreed date.
Instant decision online loans
Applying for a loan will leave a record on your credit file. This is because lenders will do a ‘hard’ search on your account and this can have an impact on your credit score. If you already have poor credit, this may limit your options for a loan.
Before you apply, you may be able to do an eligibility check. This is to help give you an initial decision before you apply – but it isn’t a guarantee you’ll be approved. It’s worth doing an eligibility check first because applying for several loans in a short period could have a negative impact on your credit score. Just be aware that not all lenders offer an eligibility checker.
If you want to go ahead with the full application, a ‘hard’ search will be done. This will leave a record on your credit file and could affect your score.
How your credit score impacts your loan
Your credit score has a big impact on the type of loan you’re eligible for. A poor credit score may suggest to lenders you’ve handled credit poorly in the past. Or that you’ve never taken out credit before. In either case, lenders may see you as a risk and this can limit your loan options.
It doesn’t mean you won’t be accepted for a loan though. You may still be able to get a loan, but at a higher interest rate. These loans may also come with a lower borrowing limit too. This is to reflect the increased risk of lending to someone with poor credit.
If you have a poor credit rating, a loan could help you improve your credit score as making payments on time and paying off the debt in full will be a positive sign to lenders. As a result, you could see your loan options improve in the future.
Here are a few things you can do to improve your credit score:
Register on the electoral roll – this will show lenders you are who you say you are and helps to protect against fraud.
Check for mistakes on your credit file – if your credit file wrongly shows you’ve missed loan repayments, this can bring your score down.
Pay your bills on time – keeping up with payments on phone contracts and utility bills can help show you’re responsible with money.
You then need to make sure you repay all credit agreements on time. This includes loans, credit cards and mobile phone contracts.