In days gone by, if individuals needed to borrow money they would simply approach their own bank for a loan.
However, changes in the market means it is now possible to pick from a much wider range of lenders who could be more competitive than the local high street bank.
Online providers are often the ones who offer the best deals but with so many firms to pick from, deciding which the best organization to go with is can seem overwhelming. As it's not a good idea to overload your credit file with simultaneous applications, here are a few hints and tips about what to consider when looking for a new lender.
Know what you want
There are many different types of finance available; secured, non-secured, bridging, debt consolidation and very rarely, guarantor loans.
One size most definitely does not fit all so it is essential to think about the kind of borrowing you are willing to take on rather than simply accept whatever you are offered.
Secured loans are usually the cheapest option but if you don't keep up repayments you could end up losing your home (or other asset you have used as security). Whilst no-one should ever take out a loan expecting to be unable to repay it, if your financial circumstances can be more volatile than most - perhaps you are self employed or in a business which is seasonal - then a secured loan may be too much of a risk.
Understand your credit profile
Getting a copy of your own credit record before you start applying for loans is an excellent idea. It is surprising how often there are small mistakes or records which have not been correctly updated and it is exactly this kind of thing which can impact on your ability to gain credit, or the rate you are offered.
Even if your credit record is accurate and up to date, understanding how lenders will view you will help you decide who to apply for.
To qualify for the best deals it is essential to have a whiter than white credit record which means no late or missed payments and no signs of financial distress i.e./payday borrowing or maxed up to your limit on credit cards.
If you have the odd blemish here and there on your credit file, there is no point applying to a lender who is known to be tough. Making an application and getting declined will simply leave a footprint on your credit file, pulling your score down further.
Even if you have had more severe financial problems, you might still be able to access credit but it is
more important than ever to target the right kind of lender.
There are different kinds of providers in the market; some specifically cater to a certain market, such as those which only offer to those who represent the lowest level of risk or those at the opposite end of the spectrum who are interested in attracting individuals classed as having a poor credit rating. However, some providers are willing to consider many different types of borrowers and will simply tailor the interest rate they offer depending on the risk.
Get help with costs
If you opt for a secured loan of any kind, the lender will need to know how much your property is worth. This is because they have strict rules about how much you can borrow in relation to the total value of your home.
Even if you are certain you know how much your property is worth, the lender will want independent verification of this. But as getting a surveyor to value your home is quite expensive you may be able to find lenders, such as Apple Loans, who are willing to pay for the costs.
Having to shell out for the cost of a valuation if you are not certain about whether the loan will be approved could well stop you proceeding. But if the lender is willing to contribute to the cost, any fees should not be a stumbling block.
A lender that respects you
Because you need financial assistance from the lender, some providers can take a tough line and expect the customer to simply acquiesce to every request because they need the money.
Some industry practices ride roughshod over the customer without taking their needs into account or really considering the impact that might be caused by actions of the lender.
For example, some lenders refuse to provide a personal quote unless they have performed a credit search on the individual. As each search leaves a dent in your credit file, this means that even if you don't go ahead with the loan, your credit file has been affected. It also means that you cannot shop around without your credit rating taking a real pounding, making it almost impossible to secure the most competitive deal on the market.
However, there is another way. Rather than simply opting for a full credit search, the lender can opt to carry out a soft search instead. This provides the lender with the valuable information they need but makes no difference to your credit rating. Apple Loans have adopted this practice; a true mark of a lender that respects its customers' needs.
Even if your credit rating is a long way from perfect, you could still have a choice of different lenders. The above factors should help you reach a decision about the best company to approach to make sure you not only get a good deal, but also get treated fairly.