Life can throw unexpected things our way, and this could involve making a purchase that we are not prepared for. A personal loan can help with covering the cost of anything from a new washing machine to an unforeseen bill. A personal loan can aid you by covering this unexpected cost up front, leaving you able to pay it off monthly in more simple and manageable payments that you otherwise would have.
A personal loan is a type of credit that you can apply for that is for personal use, rather than business or commercial use. A personal loan can be either secured or unsecured. A secured personal loan is one which is secured against an asset of yours that is of value, for example your car or house. Furthermore, an unsecured personal loan is not secured against any assets, but the loan amount you are offered will be dependent on your income and personal circumstances. Generally, personal loans are unsecured, but you may be offered a secured personal loan if you have a poor credit score and credit history. This just provides the lender with some security and reassurance if you were to ever be unable to repay the loan but your asset, (e.g. car or home), may be repossessed if you don’t keep up your repayments.
If accepted, you will receive your personal loan in full, and then you will have arranged to pay it back with interest in instalments over an agreed period of time.
A personal loan can be used for a multitude of reasons; whether this be a loan to purchase a new car, to pay some unexpected bills, to carry out some home improvements, or to pay for a wedding. The reasons for use of a personal loan are endless!
As we mentioned before, a personal loan can be either secured or unsecured. Unsecured personal loans are usually for a smaller amount, generally under £25,000. A personal loan will generally need to be secured against your assets when the loan amount required exceeds £25,000.
Firstly, you will agree with your lender how much you are able to pay over a set period of time. This enables you to make smaller, more manageable repayments each month, and allows you to budget the rest of your finances. With a personal loan, you may be able to borrow more than you would with a credit card. If your credit card only has a small credit limit and you are looking to borrow more, a personal loan may be an option for you. Also, if you have multiple debts that you are paying off individually, a personal loan is an opportunity to group all of these repayments together into one lump sum. This enables you to pay one amount every month rather than several separate payments. If your loan agreement specified a fixed rate, then you can rest assured that you will be paying the same sum every month and the interest won’t vary.
Firstly, you need to consider whether a personal loan is the right option for you and if the repayments are something that you can comfortably afford to pay each month. Also, you may be paying a higher interest rate than what is advertised. If you have a less than perfect credit score, lenders may still offer you a loan, but at a higher rate of interest than what their example originally stated. If you would like to check your credit score before you apply for a Personal Loan, Credit Knowledge offers a FREE trial in which you can see a thorough breakdown of your report. Find out more here.
Here at Tangerine Loans, we can help you apply for a personal loan by using the information you have given to us, to provide you with an instant decision on which of the lenders on our panel has agreed in principal to offer you a loan.
For more information or if you wish to apply for a loan, please visit https://tangerineloans.com/
Why is your credit score important?
It is important for a number of reasons, but overall lenders combine your credit score with the information in your credit report to assess your risk as a borrower. Having a high score will boost your chances of receiving credit, but having a less than perfect score means lenders may question your ability to repay, or you could be denied credit altogether.
How can I improve my credit score?
Use a credit card little and often.
Using a credit card responsibly and keeping it active will help build your score. Spending small amounts and paying your bills on time each month, instantly makes you look more trustworthy to lenders.
Check for mistakes on your report and fix them.
Your score is tied to the information on your report. You may find that sometimes the information on your report might not be accurate. For example an account may appear as ‘open’ when it is ‘closed’, this will make your credit score lower. Please be advised to check your report regularly, to spot and fix any mistakes as they contribute to your score.
Pay your bills on time.
Struggling to pay your bills on time suggests to lenders that you have trouble managing your finances. To avoid this, set up direct debits so that the money exits your account on time.
Make sure you are not linked to another person on your report.
You may have a spouse, friend, family member who is linked to your credit report that could affect your own personal score.
Eliminate any outstanding debt you may have.
Before applying for credit, ideally you should try and pay off any high level existing debt. Lenders may be hesitant when borrowing you money if you are already in a lot of debt.
Check for any fraudulent activity on your report.
Although rare, it is important to always be aware if something is incorrect on your report; someone may have taken out credit in your name without your knowledge. In the unfortunate case that this happens, be sure to contact the credit reference agency immediately so they can update your file.
If you want to see your own detailed report, or would like to receive further information on how to improve it visit https://www.creditknowledge.co.uk.
What is a credit report?
In simple terms, your credit report is a tool used by lenders to determine if you qualify for credit such as loans,mortgages or similar services. It helps to indicate what kind of borrower you are; if you would be a risk or if you’re likely to manage your repayments. Your credit report contains information such as your personal details, credit account history and public records. When applying for credit, you are giving lenders access to your credit report – this is a part of the application process they use to determine your eligibility. All lenders have different requirements and so they assess your score based on their own criteria. They will set a minimum that you need to reach in order to qualify for your desired amount of credit.
What is a credit score?
All the data on your report contributes to the calculation of your credit score, which is just a number that shows lenders your creditworthiness. Typically, credit scores range from 300 to 850 and the higher your score, the more likely you are to receive credit from lenders. Behind the number itself, there are some main factors that are considered during the decision-making process and therefore it’s important to know what affects your score so that you can stay in control of yours and even make improvements over time.
What is considered a good or average score?
There is no specific number that will guarantee you approval. Also, due to different lenders having different requirements – you could be refused by one company and accepted by another with exactly the same credit score. Also, different credit rating agencies calculate scores in different ways, giving different results.However, most companies view a ‘good’ score as being somewhere between 881 and 960. A ‘fair’ score could be 720 to 880.
How does my credit score affect my ability to receive credit?
Your score, along with the information in your credit report are key ingredients in determining if you are eligible for credit such as loans, credit cards and mortgages. Overall, higher scores reflect a better credit history, making you suitable to receive loans with lower interest rates.
Pleasenote diagram is not an exact representation of the relative percentages of eachfactor and is not to be relied upon for decision-making.
So, what are the main factors affecting your credit score?
1. Hard Searches: Each time you apply for any form of credit, a hard search is carried out on your report. Although the occasional application won’t have much affect on your score, a large amount of applications in a short amount of time will most likely have a negative impact.
2. Soft Searches: These will give you an indication on which products are worth applying for and won’t affect your credit score,limiting your chances of disapproval.
3. Stability: It is important for lenders to see you as a stable and trustworthy borrower. The three main ways they check your reliability are how long you’ve lived at your address, the average age of your credit accounts and if you’re registered to vote.
4. Missing payments: Missing a payment is likely to leave a negative mark on your credit report. Most companies are aware that this sometimes happens, so it isn’t the end of the world. If, however, you miss enough payments to default on a debt, the penalties are a lot more serious and this information can remain on your report for up to six years.
5. Credit limit: Your credit utilisation has an affect on your score. For example,if you use too much of your total credit limit, it could damage your score.Lenders may also consider this when assessing your credit worthiness, it’s a good idea to keep it below 30%.
6. Public records (CCJs, IVAs and Bankruptcy): Having any court judgements/voluntary arrangements against you or having a bankruptcy in your past will cause this to appear on your report for around six years and lenders will automatically mark you as less creditworthy. If you are in this kind of situation, you should try to act in accordance with any restrictions you may be given, to avoid your circumstances getting any worse.
7. Mistakes on your report: Even the most minor mistake on your report can have a huge impact on whether you will be accepted for credit or not. Therefore, it is always good to double check for any typos or spelling mistakes. Also, check for any leftover details of previous addresses or accounts, especially those where you were linked to other people –your credit file may still have connections to them.
8. Increase your score with use of credit: It can be difficult starting if you aren’t currently using credit or if you have no credit history; lenders have limited information to assess you on. In this case, you should consider applying for a credit builder card, which will help you up your score over time.
How can I improve my credit score?
You can improve it in many ways over time and an most obvious way would be to build your credit history. If you have little or no credit, it’s much more difficult for lenders to assess you during the review process as they don’t have much to go off. This is most common in young people or people who are new to the country. For those people,using a credit builder card is always a good idea but only if they make the necessary repayments to the card issuer or else they will damage their credit score.
Another way you can better your score is by proving where you live, make sure you’re on the electoral roll -you can still do this if you live with your parents or in shared accommodation.
A great way to improve your credit score is to make payments reliably. Bills such as phone contracts, rent or any regular monthly payments should all be paid in full and on time, this will gradually up your score. Direct debits are a way many people ensure that they do this.
Lastly, keep your credit utilisation low. This is the percentage of credit you use, out of your total credit limit.For example, if you have £4,000 credit limit on a card and you have used £2,000 of that, your percentage is 50%. A lower percentage is usually seen positively by companies and as a result, will increase your score.
For further information on your credit report or for access to your own detailed report, please visit https://www.creditknowledge.co.uk/. With Credit Knowledge, you will have a 14 - day free trial*after which, you will be charged £19.99 per month.
Taking time to make specific, long - term goals can really pay off when managing your finances. Getting a transparent plan in place will give you more stability when it comes to financial matters. Read on to learn more about tips on management, consolidating debt and understanding your credit report.
The first and probably the most important step is to create a budget. Budgeting may seem a little tough at first but it helps us see our financial situation clearly and it pays off in the end.
Take your receipts and bank statements, add them all up and calculate your expenses. Remember to keep track of all expenses paid in cash as well as on debit/credit cards. This will allow you to see the whole picture, it may even help you see if there are any unnecessary expenses that you can take off your future bills and help you save money in the long term.
After figuring out your total expenses, subtract them from your income for the month. Depending on whether you end up with a negative or positive number this will determine what action you should take next. If positive, you could increase your debt payments or monthly savings. If negative, reduce your expenses until it reaches zero or even try to push it so that you end up with a positive number, to get you back on track.
Although paying off debt is easier said than done, you must start somewhere. The main thing to do is get it under your control and work on getting rid of it. If you have credit card debts,student loans, etc, look to consolidate them and get the best interest rates possible. This should have the effect of saving you money and stress because you will reduce the number of monthly payments you need to arrange to make,depending on how your creditors view debt consolidation. If you only have one credit card debt and are on a tight budget, try paying at least the minimum amount as soon as you receive the bill or look for a balance transfer card with a lower rate or even an introductory rate free period, (this will mean that a credit search is performed though so please think about this before applying).
Emergency funds are an important part of a healthy personal finance plan but it should only be touched in the unfortunate event that you lose your job or an unexpected expense arises.
Credit reports give lenders an impression of how risky you are as a borrower and therefore has a direct impact on your future borrowing ability. It’s important to review it regularly so you can see if there are any mistakes on it that need to be fixed. For example, if you have ever shared a property with another person, your credit reports may still be linked even though you are no longer associated with that person. For more information and access to your own personal report, visit https://www.creditknowledge.co.uk.