Loans. They can be painful to acquire, but they may also help change your life.
For people in the United Kingdom, this is not a process that they are alone in. There were over $8 trillion in total loans given out in the country as of October 2022.
You may be one of those people in the United Kingdom that need a loan but are overwhelmed by the loan application process that you may need to go through.
Well, no need to fear. This guide will walk you through that process and give you the guidance necessary to apply for a loan.
The Loan Application
The first part of this process is the loan application itself. Here, you must submit this to a lender and tell that lender what kind of loan you are looking for, how much money you wish to borrow, and what your plan with this money is.
Lenders need to know that you have a purpose for asking for this money besides just pocketing it under your mattress or using it to go on an extravagant vacation. They want to know that you have a rational plan to use this money wisely and more importantly, detail how you plan on paying this loan back.
Whether you are applying for a personal loan or another type of loan, you are going to need to convince a lender that you have the capability of making all of the payments that are required with this loan.
So, when you go to ask for a loan, make sure you have all of the accurate information needed. More importantly, make sure you have a good presentation with supporting documents to secure this loan.
Checking Your Credit Score
Another part of the loan application process may be checking your credit score. What this does is see if you have any kind of record when it comes to borrowing money.
Now, this does not have to be a personal loan. Your credit score can be affected simply by missing a payment for your monthly credit card bill.
Remember, at the end of the day, you are borrowing money when it comes to using credit cards that you are promising to pay back in a timely matter. So, your history of paying your credit card statements on time can give lenders some idea of if you are a reliable person to pay your bills on time.
However, this is not the only form of bill payment that can affect your credit score. Things such as your auto payment, your mortgage payments, and your student loan payments can make an impact on this.
The reason for this is your credit score measures if you have any current debt that you are working off and how fast you can pay debt off when you do have it. If you have a great track record of paying all of your bills on time, then your credit score is likely to be high.
What does this mean for you? It means lenders are going to trust that you will be able to pay the loan back along with the interest.
Checking Your Income and Assets
The next thing that a lender is going to check is your annual income. This is going to require seeing some pay stubs to make sure that you make enough money where you are not living above your means.
Seeing your income gives lenders an idea of how much you can afford in monthly payments. For that reason, it is one of the most important parts of the loan approval process.
To verify all of these documents, you are likely going to have to submit personal financial statements. This not only can verify your income, but it can also verify that you have the money to pay off a loan through other means.
One example can be if you have assets that are worth a lot of money. With a personal financial statement, you may be able to convince a lender that your house can be used as collateral in the event that you are not able to pay your loan back through other means.
In other words, personal financial statements give lenders the full picture of what is going on with your financials. It may be uncomfortable at first, but it could be the difference as to whether you get approved for a loan.
Closing the Loan Process
Finally, when everything else above has been reviewed, you will get a message from your lender to go over the closing details of your loan. They will go over the terms and conditions with you.
This will include how much money you are getting, what your monthly payments are expected to be, and more. For this part of the process, it is likely there will be a legal representative there to make sure this goes smoothly. If not, that person will at least review all of the documents before submitting them to you.
Start Your Loan Application Process
These are the biggest things that you need to know about the loan application process. Remember that certain information such as your credit score and your income will be used to determine how reliable you are when it comes to paying the loan back.
Then, just make sure that all of the details in your application are accurate and prepare for the closing process. For more relevant information about financial help, see our Finance section.