We recently had a client come to us asking about debt consolidation options and in the course of the answer I realised I was writing a mini Guide to getting finance in the UK so I thought it worth posting in a Blog.
Is it easy to get a loan in the UK today? One of the main factors that will decide this or not is whether you are a home owner. If you have a property in the UK, Lenders are willing to bend a little more and there are far more options. Here’s a quick guide to what is out there if you need a loan:
- The cheapest form of borrowing you can get is via a mortgage (estimated 3-6%). If you’re a home owner then talk to your bank about taking an extension on your mortgage or, if the amount you want to borrow is large enough, remortgaging.
- For Unsecured borrowing the next cheapest loan option is via Peer-to-peer loans (est 5-8%). This is where you borrow from other private individuals rather than banks. The mechanics of how it works is managed by the Peer-to-peer lender so as far as you are concerned it looks and acts just like a regular loan. Up to £15,000 over 5 years is available with low set up fees, no Early Repayment Charges and very competitive APRs. However, you do have to have a very good credit record to qualify. See our personal loans page for access to the two biggest lenders Zopa and RateSetter http://www.choice-loans.co.uk/personal-loans.php
- After that the next best rates are from the high street banks and, perhaps surprisingly to some, the supermarkets. There has been a mini price war between a few Lenders trying to gain market share and rates as low as 6.1% are out there but, again, you need a very good credit record and, in the case of Sainsbury’s Bank, a Nectar card!?! To apply for these loans though you need to go direct as they don’t deal through brokers like us. Happy shopping!
- A further option to reduce monthly outgoings would be to take a Secured Loan. This would be a second charge (second mortgage) on your property. Depending on what your credit rating is and how much of a mortgage you have outstanding on your property (your Loan to Value, LTV) you can get rates from 6.9% and though there are other fees with this, the loan can be extended out over as much as 25 years which would greatly reduce your monthly payments
- Secured Loans are available up to 75% LTV regardless of credit history and up to £10,000 id available as a second or even third charge regardless of LTV – so there seems to be many options if you are a homeowner.
- If none of the options above suit then we turn to private lenders and APRs start to rise. We have access to private Lenders starting at 21% APR and short term lenders of small amounts with APRs that go to 148% so while they offer further options, they are not to be entered into lightly. Many of these Lenders still apply a strict credit scoring system so
- And finally, if your credit record isn’t very good at all the only option available to you may be a Guarantor loan i.e. where a homeowner guarantees your payments. These are at a representative APR of 53.9% and available up to £7,500 but can be a useful tool to help you repair your credit record, as long as you make the payments, of course.
How can we sum up all this? Well, if you’re a homeowner and prepared to put a charge on your property then the chances of getting a loan are very good. If you are a Tenant, your credit record needs to be very strong. If you’re a tenant with a poor credit record, I’m afraid to say the market is all but closed to you for a direct loans and you have to look at a Guarantor Loan.
At Choice Loans rest assured though that we are always looking for new Lenders to bring to our clients and new lending products. If we can assist you then please call on 0845 1260350 and we can discuss your personal circumstances.