Applying for a loan for the first time can be a daunting experience. However, once you understand what each stage requires, it is a relatively simple process.
This can differ between lenders, but typically includes submitting a range of personal details and completing a standard application form. Your credit score and current financial situation is then used to determine your eligibility for a loan.
There are many ways to apply too, including over the phone or by post, although applying at a bank or online tend to be the quickest and easiest.
Discover the ins and outs of loan applications with our expert guide.
How does the loan process work?
Loan processes follow a simple format. A lender will typically request information on a potential borrower’s financial situation to assess their ability to repay any agreed loan amount.
Providing you supply the necessary personal documents and information on time, processing a loan can be quite quick – giving you access to the funds you want, fast.
There are several stages involved in processing a loan:
1. Research & Requirements
Before you apply for your loan, it’s worth doing a little research into the specifics to decide which type of loan will best suit your financial situation.
To start, you should check your credit score. Applying for a loan with a bad credit score means there’s a higher chance of being rejected. Rejections for credit are recorded in your history and can lower your credit score further, which can make it even more difficult to get approval in the future.
It’s also beneficial to consider whether you’ll be able to afford the repayments on a loan, should you be approved. Our online loan calculator tool will give you an idea of the amount you’ll likely be paying back on any agreement.
Lenders will request a variety of personal documentation and information as part of your loan application, ranging from your address history to your current employment. Making sure you have all of this to hand when you are looking to apply can help speed up the process.
2. Completing your forms
Next up, you’ll need to apply. As mentioned, there are many ways of doing this, but most will involve completing an application form, either online or on paper. After you’ve submitted this, along with any other documentation requested, the lender will run a credit check on your financial history to assess your ability to meet the repayments.
Every lender will analyse a variety of factors when considering your eligibility for a loan. This can include:
- Credit Score
- Proof of residence
- Proof of income
- Proof of eligibility (age)
- Financial history ( existing or previous credit, CCJ’s etc )
- Personal history
Once the lender has gathered all the appropriate information, they’ll be able to give you a decision on whether your application has been a success. If you’ve got a poor credit score, it doesn’t necessarily mean you’ve been rejected outright. The lender may contact you at this stage to discuss your application further.
4. Approval & Acceptance
Once all the checks have been completed, the lender will be in touch to let you know whether you’ve been successful. They can offer you your required amount, a revised amount, or refuse your application.
How long does a loan application take?
The duration of the application process can differ between lenders and the type of loan you’ve applied for. However, the entire process, from filling out your forms to successfully receiving your funds, can take from a few days to a few weeks dependant on the type of loan applied for. The faster you supply all the required personal information, the more chance you’ll have of receiving your loan faster too.
It’s worth noting that the stronger your credit score is, the quicker your loan will progress – those with a poor score are likely to be contacted by the lender first to discuss their financial situation, which will likely increase the length of the application process.
What is a loan application form?
When applying for your loan, you’ll first need to complete a loan application form, either online or as a paper copy. You’ll usually submit this alongside the necessary personal documents, such as a passport and your address history. Application forms differ between lenders, but typically don’t take more than 30 minutes to complete.
What information do you need to apply for a loan?
When it comes to applying for a loan, there are a few personal details you’ll need to provide. These include:
- Bank details
- Your current and previous addresses
- Current employment details
- Personal identification, such as a passport or birth certificate
What happens after I’ve been approved/rejected?
If you’ve been approved for a loan application, you’ll be contacted by the lender with further details regarding how much they’re willing to offer you and an agreed repayment structure. Along with this, there will be the terms and conditions of the loan arrangement . It’s important that you read these in detail and familiarise yourself with how and when you’ll pay back the borrowed amount.
Once you’re happy and have come to an agreement with the lender, you’ll have the money transferred into your bank account. Most lenders will begin this process instantly, though some will specify a pay date as part of your arrangement.
If your application has been rejected, it’s best to find out why before applying again. An unsuccessful application could be for several reasons and is not always determined by your financial situation. Explore more on refused applications in our Know How guides.
Applying for a loan can be a simple and easy process, provided you submit all the required paperwork and additional information on time. A broker like Norton Finance can help guide you through the process and advise on which loan best suits your financial situation.
Discover more information on the range of loans offered by Norton Finance.