The ins and outs of a loan application

Want a loan?

Any idea of the steps you need to take to get one?

We looked at the Lloyds TSB website to see how they guide you through the process.

On the personal banking section of their website, they have a heading called Loans which takes you through to the pages you’re after.

Lloyds TSB Bank plc say they’re the UK’s number one lender, lending the most unsecured loans in the UK, so we must have come to the right place, and, they say, we can be sure of good value and flexibility. Good.

You may know you want a loan, and you’ve got some idea of how much, but really don’t know how feasible it would be to borrow that much. The website offers assistance with checking how much you can afford to repay. Clicking through, you are told that this will give you a general idea of your ability to afford the loan repayments, but it does not constitute part of an offer to you. Fair enough.

• You are asked to complete a number of boxes.
• You are asked how much you want to borrow, and, quite oddly, whether you want the guide to consider loan protection.
  You are asked about your income, your household circumstances, and your rental or mortgage outgoings.
• They ask you about your current borrowings and other outgoings, specifically  child care costs and monthly maintenance payments (to children and ex-spouses).
• Having entered the information, you press the calculate button and it comes back to tell you whether you could afford or if you might have difficulty making the repayments. These are, of course, only indicative comments.

Further down the main page, they advertise their (presumably) best loan offering for Internet-registered customers. This is a 7.4% APR on loans of £7,500 to £25,000 for up to 5 years. They tell us we’ll get an instant decision on the Internet, and it is possible to get the money on the very same day.

Clicking through for information, it tells of some of the benefits with this loan. These include ‘repayment holidays’ when you can take monthly breaks from paying the loan back. You can also choose to defer your monthly payment for three months. However, in both these cases you will pay more interest on your loan for effectively extending the term. You also have the option to take out loan protection insurance in case you have difficulty making repayments due to illness, accident or unemployment (proceed with caution: recent research suggests this type of insurance from any provider (not necessarily Lloyds TSB) may not offer the best value for money – be sure to shop around).

Further down the main page, they advertise their (presumably) best loan offering for customers who are not Internet-registered. It’s the same deal as for registered customers, but in this case, they tell us we’ll get a decision the next working day. A click-through on this one offers exactly the same deal as for Internet-registered, including the same benefits, but the decision will be the next working day.

Continuing down the main page, you can take out a secured loan, called by Llyods TSB a Formal loan. Clicking through, they can offer £25,000 or more, securing your loan against your home, a life assurance policy or another suitable asset. They have a flexible repayment option, which includes repayment of capital and interest together each month; or paying interest only, and repaying the capital at the end of the term; and any term from one month to 20 years. Application for this loan is at your local branch who should be able to give you a decision on the same day. From the Formal loan page you can also access a budget calculator which asks you questions about your income and outgoings and will give you a view to help you plan your finances.

Back on the main page, there is an offer for a bridging loan, designed to help you through the gap in your finances that can happen if you get an overlap in buying and selling homes, said to be suitable if you buy a new home before you complete the sale of your own; or if there’s a delay in moving after completion; or if your chain breaks down.

There are offerings for further education and graduate loans, for £1000 to £10,000. You have up to five years to repay the loan, and can make no repayments for three months at no extra interest. There is also an optional graduate loan protection. Clicking through, this is not a condition for taking out the loan, but, they tell us, can help in the event of your unemployment, accident or sickness. It may also provide you with critical illness cover, life cover and hospitalisation cover. The graduate loan must be applied for at your local branch.

It is a fairly comprehensive set of pages, with the pages to calculate affordability being especially useful. At least you can prevent yourself wasting time if you simply can’t afford it!