Personal Loan in London
You can think of personal loan in London like your allowance when you were a kid. When we were in school, we used to get money from our parents, this was our pocket money with which we could do as we pleased.
As we grew up, we outgrew our pocket money. What once was enough now is just not enough, and this seems to always be the case. Remember the first time you borrowed money?
It might have been from your parents, a friend or a relative, you were in need for some reason and they helped you out.
Personal loans are there to help you when you need capital to keep your finances in order and your household running. Here we discuss some ideas which will help you get the best London personal loan.
Why would someone need a personal loan?
The first step of getting a personal loan in London is to ask the question of why you need the money. The reason can be obvious but when you question it you will understand whether you should or should not get a personal loan for yourself.
For example, you may want to buy a house, but you do not have enough capital to help you buy it. The first step that you will take in this scenario is to find out the amount of capital that you need to buy the house. The next step would be to see how much you can accumulate on your own.
Let’s say the house will cost you about £300,000. You have £100,000 available. That means you are £200,000 short. A possible solution is to take out a personal loan in this scenario.
It will not be a mortgage because you are not putting down the house as collateral. One drawback for personal loans in this scenario is they have shorter-term i.e. you will have to repay the loan much sooner compared to a mortgage.
But you may not find a lender who is willing to buy you a house on a mortgage when the price is low. So, when you are buying a home that is inexpensive the chances of getting a mortgage are lower. In this situation getting a personal loan to finance the house is your best bet.
Another example, you run a software start-up company, you can successfully implement your idea, but you have not yet made any profit. You now need a loan to pay your employees and keep your business afloat.
The question that you need to ask is why haven’t I made any profits if our idea is successful? Is it because there are no customers or is something wrong with our business plan?
The reason you need to ask yourself this question is you need to know for sure if you can achieve something with the personal loan in the case of a business.
In this case, if you get the business loan and your start-up fails, you will be stuck paying for the personal loan out of your pocket. This will make things even harder for you when dealing with a loss.
But if you know the reason you need the personal loan and the person will help you fix the reason you need it then definitely go ahead. Personal loans should not be used as the foundation where you build your business on, rather use it as a helping hand that will help propel your business further.
When you know the reason, you will automatically know whether getting a personal loan will be able to fix your issue. Be pragmatic rather than being optimistic when asking for a loan. The reason being when you are thinking of the worst outcome it helps you prepare for it.
Of course, you should not be hoping for the worst to happen. I hope for the best and prepare for the worst. This is how asking why you need a personal loan will help you understand if the reason is worth applying for a personal loan.
How much do you need?
After you have figured out why you need a personal loan it is time for you to decide how much you need. When you read this there could be a number that pops up in your head or you may have a number already in mind.
Do not just go looking at the situation at face value and decide X amount of personal loan can help you fix this.
The right thing to do in this scenario is to go over the issue that requires you to take out a personal loan like paying for a home or reviewing your business plan.
Tracking your cash flow and seeing where you need cash. Take a look at your budget and see how much you can afford to pay. The rest of the amount will be what you apply for in a London personal loan.
Knowing how much you need is important because it helps you form up a plan on how to pay it back. Important advice when applying for a loan is to know how you will pay it back.
Even if the bank does not ask you how you will pay the loan back, you need to have a plan in your head, which shows how you are going to pay for the loan.
When applying for a London personal loan, they are going to ask you how you are going to pay for it. Since it is a personal loan, they are most likely not going to ask you about your business or how you will pay it back since personal loans are of smaller amounts and have a shorter repayment term.
Another reason why lenders do not want to know how you will pay the loan back is because of the higher interest rate.
When you know the exact amount you need, it helps you compare. You will be able to compare personal loans between different lenders and see which one of them charge you least. This way you will be able to get the best deal.
One of the most vital factors which determines the interest rate for your London personal loan is your credit score. If you have a good credit score the chances of your interest rate being low are much higher than someone who has a very low credit score.
If you are someone who has a lower credit score our advice is to apply for a loan after improving your credit score. Otherwise, you will get a loan that is going to have a much higher rate.
If the lenders see you as high risk, basically the lenders see your case as a risky gamble. As they see you as high risk, according to them you are a dangerous bet.
They think the chances of them getting their money easily from you are unlikely. That is why they see you as a high risk. Because of this, they will charge you a higher interest rate.
What makes you high risk? The first thing that makes you a high-risk candidate is when you have a very low credit score. Also, they will check your previous loan records if you have any and see if you paid back your payment completely.
If the payments for those loans were made on time, that is great. But if they were not on time then that also makes you a high-risk candidate.
That is why we advise checking your credit score before you apply for a personal loan. Check to see if your credit score is high or not. If it is high, then kudos to you as you can apply for a loan right away.
But if you have a low credit score then it is better to apply for a London personal loan after you increase your credit score.
How can you increase your credit score?
The first thing you should do to increase your credit score is to sign up as a registered voter for your address. The steps to sign up as a registered voter are simple: go to the local electoral registration office and sign up as a voter under your address.
The benefit of signing up as a voter is that your name will be on the electoral roll. Your address will also be mentioned on the electoral roll. Signing up as a voter helps you to be on the electoral roll which means you now have an official record showing where you live.
This helps lenders know where you live as they can see your address from the electoral roll. If the lenders know where you live, the chances of you getting a loan are higher. Hence, it also increases your credit score.
Try using a credit card. Credit cards are a great way to help increase your credit score. They are easy to get and offer you small loans.
For example, if you buy a new phone using a credit card and pay the amount you borrowed from the credit card to purchase your phone within a given period, then your credit score will increase.
If you are paying all your credit card payments within the due date, then you will see your credit score trending upwards making you a better candidate for a personal loan in London.
Do not miss the deadlines!
The deadline is the last date when it is okay to pay for your credit card bill, a loan or your mortgage. If you miss these deadlines even by a day you will see your credit score take a hit. Plus, missing these repayment deadlines will incur additional fees.
Go through to see if there are any mistakes!
You should always check to see if everything in your financial record is correct. For example, if you paid your credit card payment before the deadline but it shows that you paid it after the deadline, this will harm your credit score.
What you should do if you see a mistake is contact your credit card bank and tell them about the situation. They will take action and if it matches up you will see the date be corrected and you will have a higher credit score.
It is better to avoid unauthorised overdrafts as they affect your credit score negatively. There are two types of overdrafts: authorised and unauthorised overdrafts.
Authorised Overdraft: This is the agreed amount between you and your bank that you can go into a negative balance.
Unauthorised Overdraft: This is beyond the agreed amount. You will still be able to withdraw the money, but your bank does not agree to it.
Unauthorised overdrafts should not be used if it is not necessary. It makes a negative impact on your credit score that is why you should avoid unauthorised overdrafts.
Tips on taking out a personal loan in London
1. Check other banks
If you are looking for a personal loan in London, it is normal for you to ask for a loan from your current bank. You probably ask for London personal loan from your current bank because you have an existing relationship with them.
But you should check at other banks to see if you are getting the best deal or not. Maybe you can get a lower interest rate on your loan at some other bank. That is why you do not need to be loyal to your current bank when considering a personal loan in London.
2. Check London personal loan term
You must think about the loan term when taking out a personal loan in London. All London personal loans need to be paid back. The time you take to pay back your loan is known as your loan term.
The longer your loan term is, the higher the interest you will have to pay. The benefit of a longer-term means you will pay a smaller monthly payment for the same loan amount. Decide carefully about the term for your loan as it is an important factor.
3. Check the interest rate
When considering a London personal loan, many of us tend to not think of the interest rates. The interest rate is the profit the bank makes, and you will need to make sure that they do not charge you a higher rate.
Our advice is to go with a fixed interest rate when taking out a personal loan in London. A fixed interest rate will stay the same throughout your loan term.
Fixed interest loans are much easier to plan for and pay accordingly as you know how much you need to pay each month.
4. Check for other substitutes
If the amount you need to borrow is a few thousand pounds, then you should consider other alternatives such as credit cards.
Credit cards are a great option if you are looking to purchase something with personal loan money. Some credit cards even offer interest-free purchases if you pay them the money within a given period.
A personal loan in London is a great option if you require financial support. In most cases, personal loans do not require you to show collateral.
If you have a good credit score and are capable of paying the monthly installments, applying for a personal is a great idea. Just follow the information in this guide to get your next London personal loan.
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London personal loan FAQs
What is the best place to get a personal loan in London?
Banks, credit unions and online lenders are the best places to get a personal loan in London.
Be sure to take a look at which lender will approve you for the best loan option. Keep in mind the loan amount, interest rate, repayment period and fees involved with taking out a loan.
How can I get a loan in London?
To get a loan in London, visit your bank or online lender and see if you meet the basic criteria for a loan.
Take into account the interest you’ll need to pay back and how much you can afford to pay per month to come to a sensible loan amount and repayment term. If you don’t quite qualify, check out ways you can boost your credit rating.
What bank is easiest to get a personal loan from?
These are the easiest banks to get personal loans from currently:
• Santander UK
• Royal Bank of Scotland Group
• Lloyds Banking Group
How much loan can I get in London?
Personal loans in London generally range from £1,000 up to £25,000.
Larger banks can offer personal loans up to £50,000 if you’re already a customer at the bank, but high loan amounts are rare cases. In cases where a high loan amount is offered, a security is in place to ensure repayment.
How can I get a loan without a job?
You can still get a loan in London even if you don’t have a job. Lenders will consider your loan application even if you aren’t employed, but being approved for your loan depends on if the lender believes you are able to repay the amount on time.
Are online loans safe?
Online loans are safe as long as you are dealing with a reputable lender. A red flag to look out for is an online lender who charges fees to help you find a loan.
What is the cheapest way to borrow money in London?
Personal loans and credit cards are the cheapest ways to borrow money. Other ways include taking out a bank current account overdraft or borrowing against the value of your house.