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Things to Consider When Applying for a Home Loan
When it comes to taking out a loan, you’ll find that the amount you’re allowed to borrow by lenders can differ from other borrowers. Different lenders set different maximum loanable figures for their borrowers. However, this does not mean that you can take out the maximum amount allowed.
There are usually a number of factors that can affect this. For instance, your credit score, your income, and your existing debts are just a few of the things that will determine what your final loanable amount will be.
While you are given considerable freedom on how you are going to spend a personal loan, lenders will still want to know how you intend to use the money. It is important to disclose the necessary details to the lenders since this can affect their decision on whether to approve it or not and how much they’ll lend you.
Your current debts
Lenders will want to know how much your current debts are and how they compare with the income that you are earning. The debt-to-income ratio is something that lenders use to assess whether you’ll still have the financial capacity to pay back the loan if they are to approve it considering the already existing debts you have. This will also affect how much they will choose to lend you. Generally, a higher DTI means a lower loanable amount.
Your credit score will always figure in any attempt you make to secure credit. Not only will it affect your chances of getting approved. It will play a role in how much you’ll eventually be allowed to borrow too.
Getting the maximum loanable amount
If you want to improve your chances at getting approved for a much larger loanable amount, you can start by improving your credit score. Paying off your existing debts can lower your DTI so that’s another thing you can do. Being regularly employed doesn’t hurt. In addition, you can also present collateral and take out a secured loan instead to get a higher loan amount.
When people apply for loans, it is usually for a number of reasons. They could be building a house, fixing a car, starting a business, or even paying for a medical expense.
While most banks and lenders would be more than happy to provide you with the money that you want to borrow, there are specific conditions that you will be expected to meet first. However, there are conditions that you’ll be expected to fulfil first such as a sound credit history. Generally, a bad credit score will make it more difficult for you to get approval. If you do not have a job, there is a very good chance that you’re in some form of financial difficulty so getting approved for standard loans may be a lot more difficult.
Applying for loan without a job
People often ask if it is possible to sign up for a loan when they are currently unemployed. It may be more difficult to get approved for one, but you can. You do have to deal with the downside of a more expensive interest rate. You may get a loan from a bank too, if you can present collateral. You just have to present one that is worth more than what you are borrowing.
Criteria for applying for a loan without a job
Despite being unemployed, there are people that are still earning some sort of regular income. If you are self employed or run your own business, you can just show to the lender how much money you are making daily or weekly to prove that you are earning something. This is a great indication that you can afford to pay the loan back. So showing proof of income consistency despite being unemployed increases your chance for approval and better rates.
Your credit history will figure on how lenders will decide. If you have taken out loans in the past and have paid them off on time, you'll be able to establish some level of trust with your lender so you get approved for loans with better terms- a sign that you're a responsible borrower.
How good or bad is your credit score is crucial for your loan approval. Even when you are unemployed, if your credit score has remained good all this time, then you can get still get a loan. If it is poor, take the time to fix it before you apply to get a better chance for approval.