Although many people still choose to book an appointment with their bank manager and travel down to their nearest branch to ask for a loan, more and more of us are applying online instead.
Why? The main reasons behind the shift to applying for loans online include:
With Little Loans, you can borrow between £100 and £5,000 and pay your loan back over a period of between three months and thirty-six months.
Much of the new business generated by financial services company today is over the internet. Borrowers can now apply for online loans at any time of the day or night and even from their mobile phones.
However, there's no real answer to the question of which online loan company is the best. That's because every lender and borrower is different - each lender has their own preferred type of borrower they like to work with.
For example, banks, building societies, and mainstream financial institutions prefer to lend big sums of money to people with "good" or "excellent" credit ratings.
On the other hand, there are many specialist funders who only want to offer smaller loans to people with "fair", "bad", or "poor" credit scores.
As you can see, the best online loan company for one borrower is probably not going to be the best online loan for another borrower.
If you have a fair, bad, or poor credit rating, what are the options open to you? As you might expect, a less than perfect credit score means that the range of lenders and financial products available to you are limited.
Borrowers in these circumstances can either apply direct to a specialist lender or they can work with a specialist broker instead.
When you apply direct to a specialist lender, you're only going to be offered their range of financial products (subject to status).
What's more, when you complete their application form, they then have to run a hard credit search on you as part of their decision-making process.
If you're approved, that's great.
But, if you're declined, a record of that hard credit search stays on your report. Other lenders you apply to can see how many hard credit searches have been run and, if there are too many in a short space of time, your application is more likely to be declined because they might believe that you're struggling financially.
Also, too many recent hard credit searches might negatively affect your credit score.
Brokers are different - they don't lend money themselves. Instead, they work with a registered panel of finance companies.
How does this work? When a lender joins a broker's panel, the broker asks the lender to define in detail what an eligible borrower is to them - questions like:
A broker will compare the personal and financial details you've given them on their application form with the eligibility criteria provided to them by each of the lenders on their panel. The comparison itself takes just seconds because many brokers are now fully automated.
Your broker will then contact the lenders in turn where there appears to be a good match. Each lender then runs a soft credit searches on the borrower - unlike hard credit searches, soft credit searches cannot be seen by other lenders. There's also no effect on your credit score no matter how many soft searches are run.
Lenders base their decision upon your personal and financial circumstances - the most important factors in deciding suitability for a loan are:
Many lenders have a range of credit scores they'll accept when deciding whether to approve a loan. Generally, your score should fall between the minimum and maximum credit scores in that lender’s range.
When you borrow money using online loans, affordability is essential. If there’s a risk that a customer won’t be able to comfortably make their monthly payments in full and on time, no lender would want to approve that application to borrow money.
When you apply for an online loan, lenders prefer you to:
You'll need to let your lender know how much you want to borrow when you apply for your loan.
To determine whether you can make the monthly payments, they'll subtract your outgoings from the level of pay you take home to see if you have enough money left over to comfortably repay the loan.
You'll be given the option of choosing how many months you want to repay your loan over - this is the "term" of your loan.
The term will affect the cost of your monthly repayments. A longer term means that your repayments are lower but that you pay more interest on your loan overall.
Your lender will ask you about your monthly:
When you apply, you'll be asked for the purpose of the loan:
You'll be asked to share information about
On the application form to borrow money, you'll need to provide both your mobile phone number and your email address in case the lender needs to get in touch with you.
When you apply for a loan, you'll be asked about your current banking arrangements including your current account number, sort code, and details of a debit card linked to your account. This is to ensure that the money you are asking to borrow is being paid into a UK bank account and also as an identity check.
Most lenders are now able to provide borrowers with instant decisions on the loans they've applied for.
If your application has been accepted and approved, you'll then be shown a quote from your lender. The quote will be based upon the lender's assessment of the risk in providing you with the loan.
If you agree to both the offer and the terms and conditions by signing the online paperwork, you'll receive the money paid directly in your current account within 15 minutes*.
If your application to borrow money is accepted by an online loans provider, you could receive the money in your bank account within minutes* of signing the online paperwork.
This form of lending is unsecured. You do not need to offer security to a lender. Homeowners, tenants, and borrowers living with parents are welcome to apply for online loans. Because bad credit loans are unsecured, the APR on them is likely to be to be higher than secured online loans offered to borrowers with less than perfect credit histories.
Your interest rate (APR) is fixed - rates remain the same for the entire period of your loan. Repayments you make to your lender will be for the amount you agreed to whe≈n you took out your loan.
The representative APR is the interest rate offered by your lender to 51% or more of their borrowers. If your loan is approved, you will be shown the rate the lender wishes to charge prior to your agreeing to accept the loan. The APR that you're offered may be lower or higher than the lender's representative APR.
If you're worried about managing your current level of debt and you'd like to speak to someone for help, you may find it useful to access the free services of one of the following debt help organisations StepChange, PayPlan, National Debtline, the Debt Advice Foundation, the Money Advice Service, and Citizens Advice.
Our panel of lenders offers loans for between £100 and £5,000 to borrowers - even if they have less than perfect credit histories. If your application is approved, the money may be paid into your bank account within minutes*.
There is no charge to use our service if you choose to work with Little Loans.
Representative Example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28. Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. We’re a fully regulated and authorised credit broker and not a lender