Make sure you’re loan ready with these top tips

With a New Year just around the corner, demand for loans is expected to spike once again in January as customers set their resolutions for 2025. Just this year, Google searches for ‘loans’ surged 44% in January compared to December 2023.

As Brits gear up to make their dreams a reality, many will look for a loan to help them make their important things happen sooner.

Personal finance specialists Novuna Personal Finance share their tips to help customers get their applications ready.

1.  Find the right lender for you

Each lender will have different eligibility criteria and application processes so it’s worth doing your research. However, you should always choose a lender that’s regulated by the Financial Conduct Authority.

Make sure you meet the lender’s minimum eligibility criteria and have a good idea of their turnaround time to give yourself the best chance of being accepted (Novuna Personal Finance applicants get an instant decision and, if accepted, funds received within two working days). You should only apply with one lender at a time to avoid lots of hard credit checks appearing on your credit file, which could indicate money worries and therefore be a red flag to lenders.

2.  Get a copy of your credit report

Lenders normally assess two main things when deciding whether to accept you: creditworthiness and affordability.

Your credit report will be assessed during the application process. It’s essentially a record of how you’ve managed debt in the past, giving lenders a good idea of what kind of customer you’re likely to be in the future. If you have mismanaged money in the past and have a low credit score, you’re more likely to be declined or offered a much higher annual percentage rate (APR).

It's a good idea to check your credit report in advance of applying for a loan, so you can get an idea of your credit score and how likely it is you’ll be accepted. If you spot any errors or inaccuracies on your credit report, try to get these rectified as soon as possible so your application isn’t affected.

If you’re keen to check your eligibility before committing to a full application, online comparison sites may offer a soft search option which allows you find out your likelihood of acceptance without impacting your credit score.

3.  Get your paperwork ready

Lenders will ask for things like your address history, income, employment information and bank account details. Gather the information you need before you hit that ‘apply now’ button so you can complete the application form much quicker.

Mistakes on your loan application will likely result in your application being declined, as the lender won’t have all the information they need to make a decision. If you’re wanting a smooth and straightforward application journey, prepare everything you need in advance.

4.  Be realistic about loan amount and term

It’s crucial to work out what is reasonably affordable within your monthly budget before applying. To help you save time, use an online loan calculator to get an idea of how much a loan could cost, using different loan amounts and loan periods.

One little-known tip is to work out the cost of borrowing across different loan amounts as you may find you’ll pay less interest when you borrow more. Smaller loans typically carry a higher APR because they generate fewer earnings to cover the fixed costs associated with servicing them. It may be most cost-effective to borrow slightly more if you are borrowing close to the tier threshold (for example, borrowing £7,400 may have a higher total repayment cost compared to borrowing £7,500, when the tier often changes).

5.  Try open banking to fast-track decisions

If your application is referred, this just means the lender needs a bit more information from you to make a decision. The lender may ask to look at your bank statements to assess your income and expenditure.

If your lender offers the option to consent to open banking, this is often a much quicker way of providing the information they need. This gives the lender limited access to your bank account transaction data electronically, which can often be automatically assessed to speed up the decision-making process.

Theresa Lindsay, Group Marketing Director at Novuna Personal Finance, says: “If you’re looking for a loan, always do your research to make sure the lender you choose is reputable, regulated by the FCA and has plenty of real customer reviews.

“If you’re keen to get your loan application processed quickly, avoiding unnecessary delays, make sure you’ve thoroughly researched the right lender for you and have all the information you need pre-prepared to help you complete the application.”

If you want to find out more about the personal loan application process, read Novuna Personal Finance’s money guides.