One of the first things taken into consideration by the lender will be your income. The lender has to consider your monthly income and expenses and determine whether the loan will lead to any financial difficulty or trouble repaying.
For instance, to give a £10,000 loan over 6 months to a person earning £500 per month would certainly put a strain on their finances.
You will need to have a stable income and whether you are employed full-time or part-time may also be a deciding factor. You may need to meet a certain threshold of income in order to apply for certain loans e.g £1,000 per month.
To confirm your income, some lenders may request a copy of your most pay-slip or bank statement to show proof of your earnings.
When a lender receives your loan application, they will carry out a credit score through one of the three main credit reference agencies in the UK in order to determine eligibility.
Having a good credit score will increase the likelihood of you being able to borrow the maximum amount available, if you need it. If you have a strong credit score, it is probable that you have a history of paying back any loans promptly, and do not have recent defaults on file and therefore you present a lower risk of defaulting.
On the other hand, a bad credit score is going to reduce the overall amount you can borrow, or it may mean you pay a higher interest rate than you otherwise would if you had a strong credit history.
As a result, it is always worth checking your credit report regularly and seeing if there are any ways that you can improve it or keep it high.
If you are concerned about how your credit score will affect your eligibility, there are no credit check loans available, but these may require you to use extra security such as a guarantor or collateral
The lenders partnered with My Financial Broker will usually carry out an affordability check to verify you can afford to take out the loan amount that you have requested.
A lender will check that you have sufficient financial resources in order to meet all your financial commitments including any loan repayments.
Most loan applications will ask about your basic monthly expenses including your rent, credit card bills, food and travel. By calculating your income, expenses and any other existing loans allows the lender to see how much you can afford and therefore borrow.
If there are inaccuracies in your application for a short-term loan, this will slow down its progress. This is why it is vitally important that you have double checked your application before sending it to see if there are any errors that need to be changed.
This can make a huge difference to how quickly your loan application is processed, and the last thing you want to do is make the process longer simply because of a small mistake made whilst applying. Common things that are not always put down accurately include addresses, monthly income and expenditure.
It is natural for applications to slightly inflate their incomes to borrow more money or as a sense of pride. But if the lender needs to cross reference this with a pay-slip, it is just an extra process that will slow you down.
If you are the repeat customer of a particular lender and have already repaid one or multiple loans on time, this could increase your trust with them and they could allow you to borrow more in the future as a result. You may regularly hear about lenders offering a cap for the first time loan, but this can increase for subsequent loans.
Your application will still be subject to a credit and affordability check and the lender has to ensure that your financial situation is not getting worse – however, being a repeat customer is often a way to access more credit or finance.