Increasing your chances of getting a loan

Although credit conditions have become far tighter in the UK over recent months many of us still have the need to find suitable finance for one reason or another – the only thing is that finding suitable finance is no longer a simple and straightforward task and potential borrowers face a far greater risk of being turned down for a loan than they did in the past.

Of course there are still loans available for those looking for finance, but the availability of both secured and unsecured loans has become more restricted over the past six months, as well as becoming more expensive.

The reason for the increased difficulties in getting finance is that lenders have found it more difficult and more expensive to get finance on the wholesale money markets in order to fund their lending since the credit crunch swept across the UK late last summer.

This has inevitably had a knock on effect when it comes to consumers getting finance and many have experienced severe difficulties when it comes to getting finance over recent months.

It has become increasingly important for consumers to take steps to increase their chances if they are looking to take out finance. There are a number of ways in which you can increase your chances of success depending on your needs and circumstances.

Amongst the things that you need to bear in mind when it comes to getting a loan are that lenders have now tightened up their lending criteria, making it more difficult to get finance, lenders have made borrowing more expensive for many consumers, and lenders have cut back on the choice of loan products available.

Use your equity

If you are a homeowner and you are looking to raise finance then you may find that using the equity in your home is a good way of increasing your chances of success.

A secured loan is a loan that is secured against the equity in your home, and therefore provides a greater degree of security to lenders.

Many lenders have now really cut back on unsecured lending, as they have become increasingly wary about the risk of bad debts in the current financial climate – there is far less chance that they will lose money on a secured loan compared to an unsecured one, because borrowers are less likely to default on a loan that is secured against their home.

The lender also has the security of knowing that the loan is secured against the home, and this often means that the borrower can enjoy a greater chance of success. Therefore if you have the option of an unsecured or secured loan you may fare better opting for the secured option whilst credit conditions are as tight as they are.

Check your credit

Having your credit in good order has also become increasingly important in the current financial climate, and those with damaged credit will find that borrowing has become particularly difficult. Rather than risking a rejection from your loan application, take the time to go through your credit file first in order to check that everything is in order.

You could find that there are errors or outdated information on the file that could have had an adverse effect on your rating, and this could in turn affect your ability to get finance. By getting your credit file sorted out first you can increase your chances of getting a loan rather than risking rejection, which could in itself further damage your credit.

Use a broker

Finding a suitable lender and applying for finance can be time consuming and frustrating, but in the current climate where the chances of getting turned down are now higher it can also be a risk going through individual lenders.

You may find that using a specialist broker could help, as these professionals work with a range of lenders that deal with all sorts of needs and circumstances, and will therefore have a good idea of which lenders is most likely to accept your application based on the details that you provide.

Using a broker means that you will only have to complete one application form rather than loads of forms for a whole bunch of lenders, and you won’t even have to do any of the legwork, as the broker will do all of the research for you in order to find you the best deal for your needs and circumstances.

If you have damaged credit then a broker can prove particularly useful as an experienced broker is more likely to know which lenders will consider your application based on your credit rating, so you won’t have to make applications to individual lenders and face the increased risk of rejection.