Successfully Navigating Through the Loans maze
High street retail banks are facing stronger competition than ever from a diverse range of lending sources, introducers and financial services brands. Comparison sites such as Moneysupermarket and GoCompare have brought more information and access to lenders whom many customers did not know existed, while supermarket chains such as Tesco and Sainsbury’s offer loans at very competitive prices compared to their retail bank rivals.
This should mean more consumer choice as these businesses compete for customers, but in reality, it is harder than ever to secure loans since so many lenders have removed the human element from underwriting loans. Has the government’s involvement and politicians push for more money to be lentout helped? No, and not even according to MP’s own opinions; “A lot of customers feel the decision by their bank not to lend is arbitrary. A ‘computer says no’ culture,” says John Thurso, the Liberal Democrat MP.
So what’s the best way to navigate through the maze?
Before going for a loan, there are some government schemes that may be able to help you, so you should check these out first. There are two forms of help you might be eligible to apply for: Local Authority assistance: From April 2013, each local authority is responsible for providing help to its residents who are struggling with an emergency; this could be you not being able to afford to buy food, needing help to stay in your own home or needing help if you have just come out of care, hospital or prison. Sadly, this is not straightforward and will depend on the funding that your local authority has been available. There are no nationwide rules, and each council can arbitrarily choose how much financial help to offer, if any, and who is eligible. National assistance: The next type of help comes in the form of budgeting loans and advances. If you are not receiving benefits, you will not be eligible for this type of help, however, if you are receiving benefits and have no or low savings, then this could be for you.
If you have established that there is no government help available, but you need to borrow money, then you need to establish three things before you head off into the maze:
– How much do you need? (Not how much would you really like, or how much do you think you could spend if you had access to it – how much do you really need)
– How much can you afford to pay back? Is it a short-term cash flow problem you have, with some bills you need to pay quickly, but you will have the money to repay on payday? Or do you need to borrow to perhaps buy a car – if so, work out how much you can afford to pay back from your income each month, after you have deducted all the costs of things that you simply cannot avoid (energy bills, community charge, food and clothing, etc.)
So if you have established that there is no government help available in step 1 and in step 2 you have worked out the size and type of loan you will need; you now need to find a lender who will say yes.
There three options to finding the lender and right loan offer for you:
– go direct to the lender
– pay someone to do it for you
– find someone who will do it for you, for free
If you have a flawless credit history, have minimal borrowings and know exactly which lender has the product you need, then this could be the route for you.
Getting some help
If however you don’t have flawless credit (perhaps missed one credit card payment 9 months ago, for example) then many traditional lenders underwriting scorecards will simply turn you down. You may also be turned down if you have existing loans, have been in your job or your home only a short time, or don’t appear on the voters’ register where you live – all of these are very common reasons for lenders to decline your application. This is where having some help can work very much in your favour.
Loan sourcing sites and brokers have access to many lenders that simply do not exist on the high street – they choose not to have expensive high street office rents and instead source their customers through these loan sites and brokers. You can choose whether to pay a broker to assist with your search, or use a site for free to find out what your options are before successfully obtaining that loan you need.