These days, getting a loan from your bank or mainstream lender is a lot harder than it was 10 years ago. There are a number of reasons why this is the case however many put it down the recession. Following the recession banks were prompted to tighten their criteria and consequently become a lot stricter regarding who they lend their money to.
This left a large gap in the market for lenders to help those who had been turned down by their bank; now known as the subprime loan market. This market was filled with products like guarantor loans, payday loans and instalment loans.
Each of these loan types have their place in the market. However, payday loans only offer small amounts so if you’re looking for more than £500, you’ll need to look elsewhere. Guarantor loans offer up to £10,000 on the basis that you are able to find a homeowner guarantor to support the application, if you can’t find a guarantor they won’t be able to help. In this situation, instalment loans provide a happy medium; lenders will offer up to £2,000 and will not require the back up of a guarantor – this has made them a popular choice amongst those who have been turned down by the banks and high street lenders.
Whilst the criteria of instalment loans is somewhat more flexible than those of the banks and mainstream lenders, there are still a few things you can do in order to improve your chances of approval when applying. On this page we are going to offer our 5 step guide to getting an instalment loan.
Step One: Work out how much you need to borrow
Prior to applying for any loan it’s important that you know exactly how much you need. Commonly, people will apply for the largest amount however this isn’t necessarily a good idea; applying for more than you actually need will mean you are paying more back in interest, subsequently making you worse off in the long run.
The amount you need will be largely dependent on your desired purpose for the loan; if you’re looking to pay off payday loan or credit card debt then calculate exactly how much debt you have and this will give you your required amount. Equally, if you’re looking to carry out some car maintenance then set aside a bit of time to researching how much the parts and labour is going to cost you.
Step Two: Decide on a suitable loan term
Now that you know exactly how much you need, it’s time to decide on a loan term. The best way of doing this will be to experiment with the sliders on your desired lender’s website; by spreading the repayments over a longer term you will notice that the monthly instalments are smaller but the total cost of credit is higher. Equally, a short term loan will result in higher monthly repayments but a lower cost of credit.
The most suitable loan term for you will depend on your level of disposable income. If you have a high level of disposable income, go for a shorter loan term and if you have a low level of disposable income go for a longer term. It is important that whatever loan term you choose you ensure that the repayments are affordable for you. Any responsible instalment loan lender will carry out affordability checks on the applicant so by being confident that the loan is affordable prior to applying stands you in good stead of passing these initial checks.
Step Three: Make sure you’re eligible
You’re almost ready to make your application however just before you do so it’s important that you check you’re eligible for the loan. Different instalment loan lenders have different criteria’s so don’t think that just because you’re eligible with one lender you’ll be eligible with all of them. Pay particular attention to things like age criteria, minimum income criteria, employment criteria and required residency status.
Step Four: Prepare for the application
Some lenders will require you to submit some supporting documentation so it may be worth taking some clear photos of your proof of ID (passport/ driving license), proof of address (utility bill) and proof of income (bank statement/ payslip) so that if lenders do need to see them you’ve got them on hand. Much of the time these won’t be needed however if any of the automated checks don’t return the required data then supporting documentation may be required; by having them on hand you essentially reduce the chances of delays in your application.
If there are any problems or the lender needs to carry out some security checks on you then the chances are they’ll try to contact you over the phone. For this reason it’s a good idea that you always have your phone on you at all times.
Step Five: Make your application
You’re now ready to make an application. Make sure that you give yourself plenty of time and are not rushing your way through it. It’s very important that you enter all of your details correctly and pay particular attention to all of the terms and conditions of the agreement. If you ever asked to pay any fees then abort the application – it’s likely that you’ll be dealing with a fee charging broker. Any legitimate lender will advertise the fact that they charge no fees at any stage of the application so look out for this on the website.