Applying for a Loan

There are different ways of applying for an unsecured loan. It is possible to apply directly at a traditional lender such as your bank or a building society, or you may also choose to send a written application to specialist loan company. Applications are also conducted over the phone with a representative from the loan company, or even by filling out a form on the Internet. The interest rate for the loan can depend on the method that you used for applying. For instance, an application done over the phone may have a different interest rate offered from that of an application done through the loan company’s website.

Unsecured loan applications are usually assessed more quickly than secured loans. Since no collateral in the form of property is required, there is no extra time taken to value your home for the loan’s security. A decision regarding your loan application can take as little as 24 hours.

To facilitate a quick and accurate assessment of your application, lenders use credit scoring. This allows them to quantify the amount of risk you present to them as a borrower. Your overall credit score is based on a tally of points taken from different portions of your application. If your score meets the lender’s minimum requirement then your application will be approved. Credit scoring requirements are not disclosed to the public to ensure the security of their application process, primarily to prevent the possibility of credit fraud. This is why a lender will never reveal to you your credit score, regardless of whether your application was accepted or not.

Besides credit scoring, a loan company will in most cases conduct a credit check through a third-party credit agency (i.e. Experian). These checks are to verify whether or not you have defaulted on past loans, and whether County Court Judgements are filed against you. The credit check also gives the loan company feedback regarding any of your current debts. All this information is taken into account when deciding whether or not to approve your application.