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Published on June 17th, 2015 | by Pete

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How to qualify for the best rates when taking out a loan in 2015

It goes with saying that almost everyone at some point in their life will need to take out a loan or borrow money on some type of credit agreement. Whether to buy a new car, pay for unexpected emergencies, or to cover your expenses until payday.

We caught up with personal finance experts Lendingexpert.co.uk to help us unravel the world of loans and to show us how we can qualify for the some of the best and cheapest loan rates.

Here is what he had to say:

For the majority of people searching online is the first port of call when looking at loans, how much you can borrow and how much it’s going to cost you per month. Most of the comparison sites now do a good job of comparing most of the lenders and loan providers for us so we can quickly see at a glance which loans are the cheapest, and offer the best value.

Here are some simple tips and ideas to ensure you qualify for the best rates.

1. Know you credit score. If you don’t know anything about your credit rating or credit score then you really should take the time to investigate where you stand regarding this. There is now a wide range of online subscription services that allow you for free, or a small monthly subscription to get access to this information. If you want to be eligible for the lowest loan rates then you’re going to need to have a good credit score and credit history. Banks and lenders rely upon your credit score to determine how credit worthy you are, and which loan products you’ll be offered. The better you score, then the better and cheaper rates you’ll be offered.

2. Investigate and clean up any past credit issues. If you have an excellent credit score then well done there is probably nothing more you need to do expect carry on managing your finances responsibly, and ensure getting the best rates. However, if you have had credit issues previously such as missed payments, outstanding CCJ’s etc then now would be the time to see what can be done to put thing right. This may been paying any outstanding CCJ’s or rectifying any issues. Many of the credit monitoring agencies such as Experian.co.uk offer advice and guidance on how to improve your credit file. There is a useful article and further information on the subject of cleaning up your credit file here.

3. Use a credit matching facility. These types of loan comparison services don’t simply display the loan by the cheapest rates. Using the information you provide, they then display the cheapest loans that are eligible for you based upon your personal information such as employment status, if you are a homeowner, and your credit score. The idea here is that you are only presented with loans that are eligible for you to apply for. This means you’ll avoid making failed credit applications, and will vastly improve your chances of applying for the correct type of loan for you.

Taking the time to investigate and improve your credit score now will mean you’ll have a better chance of getting a lower rate loan when you come to apply.

4. Consider using a guarantor. If you have some adverse credit or you have been refused a loan in the past then you’ll be able to improve your chances of getting a loan with the help of a guarantor. Guarantor loans are specially designed for the “poor credit” borrower in mind. A guarantor provides the bank or lender the additional security they require in order for them to offer you the loan you need. Guarantor loans are expensive when compared with the better rate personal loans; however they are cheaper when compared to some of the other poor credit loan alternatives.

5. Consider borrowing more. You’ll often find with all the lenders than the rate of interest charged reduces the more you borrow. Therefore, for some people this may be an opportunity to borrow more than they initially require, take advantage of the lower rate, and use the additional loan funds to consolidate other more expensive debts and credit such as an overdraft or credit card balance. Consolidating your debts not only means that your find managing your debts easier with only one loan repayment, but also the opportunity reduce your monthly loan repayments.

6. Consider a secured loan. For some people who have a lower than average credit score getting a regular personal loan can be expensive. Bad credit personal loans can charge rates of 50% APR plus. However, if you are a homeowner and have adequate security in your home then it is very likely that you’ll be offered a secured loan at a much lower rate of circa 15% APR. Therefore for many people in this situation getting a homeowner loan is a cheaper option. Something to carefully consider about taking out a secured loan is that in the event you failed to repay your loan then your home would be open to repossession by the lender. Therefore it is essential that you understand these risks and are confident in your ability repay your loan, or your home could be at risk. Further information on rates and lenders can be found here.

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