Historically, the process of applying for a loan has been far from easy. The hassle associated with loan applications typically arises from a bad credit score or the long wait between submission and approval, which causes stress and frustration for borrowers.
But due to the recent rise in online lenders, the process of applying for a loan has become a lot more straightforward. If you’re not clear about how to apply for a loan, check out our guide below that explains everything you need to know.
Consider your eligibility
Your first step should be to check if you’re eligible for a loan before kicking off the application process. This will save you a lot of time and effort. For most online lenders like Koyo Loans, you:
- Need to be at least 21 years old
- Must be a UK resident for a minimum of six months (and be able to provide proof of address for this period)
- Mustn’t be bankrupt
- Should be in receipt of regular income
- Must have a mobile phone
- Need to be in possession of a valid email address
- Can’t have a bad credit history of a history of CCJs
In most instances, if you don’t meet the above criteria, you won’t be able to apply for a loan. You should always check the criteria set out by the lender before proceeding with an application, and you might want to use a general eligibility calculator to assist you.
Utilise a personal loan calculator
Making use of a personal loan calculator is a great way of working out how much you need to borrow, as well as the terms and conditions associated with paying it back. When you input your information, you will be given a realistic idea of what your repayments, interest, and Representative APR might be.
This will help you understand if you can afford to take out the loan in a way that is clear and easy to understand. Koyo Loans, for instance, provide a broad range of loans between £1,500 and £12,000, with repayment periods of up to 60 months. 27.9% APR Representative.
If you’re happy that you can afford the repayments and you’re eligible to submit an application, you can proceed with your application. To get things underway, you will need to provide your personal information, including things like your name, current address, employment details, annual income, and the reason that you’re applying for a loan. This information is the foundation of your loan application and typically takes less than five minutes to complete.
Open banking check and submission
Online lenders like Koyo will perform a bank check once you submit your application. This is in contrast to traditional lenders and banks, who focus solely on your credit score and CRA data. Modern, online lenders realise that there’s more to the picture than your credit score alone.
In addition to a credit check, online lenders turn to FCA-regulated third-party providers (such as Truelayer) to access Open Banking data that provides them with accurate financial information to support your application. This enables the lender to make a fair and just decision based upon real information, as opposed to simply what others say about you.
The final decision
After the Open Banking check is completed and approved, online lenders typically make a decision within 48 hours. If you’re successful, the money will appear in your account soon after. You can then set about managing and monitoring your loan via an online portal, which ensures you can keep on top of your monthly payments.