How to apply for a loan

What do you need to apply for a loan?

When you apply for a loan, you will usually need to supply the following documents:

• Bank details

• Current address, and any previous addresses for the past three years

• Employment details

• Personal details such as  your date of birth

In addition to the physical paperwork you need when applying for a loan, there are other eligibility criteria to fulfil in order to be accepted. These may include:

• Having an excellent credit score

• Having an up-to-date credit file – any mistakes or discrepancies, such as the wrong address, could stop a lender from approving your application

• Being at least 18 years old. For some loans you need to be 21

• Being in full-time employment and meeting the minimum income requirement

What are eligibility criteria for a loan?

Eligibility criteria are the lending conditions you need to meet when applying for a loan.

Lenders usually have certain rules about how much borrowers need to earn, how old they have to be and the state of their credit record. You may be able to find these on a lender’s website.

It's unlikely you'll be approved for a loan if you do not meet a lender's eligibility criteria.

The loan application process

You can apply for a loan online, by phone or post, or in person at your local bank branch. Not all lenders offer every option, so be sure to check first.

When applying for a loan online, you need to carry out some extra security checks. It’s important to check in your browser that the URL (web address) of the website starts with “https://”, for example. The “s” at the end of “http” means that the website is fully secure and all your personal information is being encrypted. 

Whichever way you apply for a loan, the process is normally the same. It will most likely follow this pattern:

• You complete an application form filling in information about the loan you want and your personal and employment details. This also gives the lender permission to run a credit check.

• The lender runs a credit check to assess how risky it would be to lend to you. It will use this to decide whether to lend money to you or not, and what interest rate it will charge. It will also check fraud lists and confirm your address details.

• The lender makes its decision on whether or not to lend to you and at what rate. It may not be at the representative APR rate advertised as it will be based on your personal circumstances.

• It’s then up to you to accept or reject the offer.

Get a quote before you apply for a loan

To determine what rate you would have to pay on a loan, some lenders offer a soft credit check before you send the full loan application. This is sometimes known as a 'soft quote'.

You still have to give all your personal details, but the lender’s search does not leave a mark on your credit record. This is a good idea as it gives you an indication as to the rate you might have to pay, or if you will be accepted at all, without having any impact on your credit score.

You need to prove your income to get a loan

As part of your loan application, you have to include your salary and monthly earnings. This is to show a lender that you can afford the loan and that you will be able to make the monthly repayments. 

Lenders will have a list of the types of  income sources accepted so check this before you apply. Examples of incomes that may be excluded are:

• Benefit payments such as child benefit, income support, or housing benefit

• Business profits (if applying for a personal loan)

• Reimbursement for expenses

• Maintenance payments from an ex spouse or partner

• Non-guaranteed bonuses or sales commission

• Overseas income such as from holiday lets abroad

• Rental income from any buy-to-let properties you own

• Student loans

You need to be able to prove any additional income in your loan application. You can do this by supplying recent bank statements or payslips showing your earnings. If you have this ready in advance it should make the process faster and less stressful. 

Can I get a loan if I'm self-employed?

If you are self-employed, you can still get a loan but the process works a little differently. You usually need to have at least one full year of audited accounts to apply for a loan. Some lenders may ask for more and some may exclude self-employed earnings altogether. Always check before you apply to reduce the chance of being rejected. 

Find out how you can access self-employed loans

What happens after you apply for a loan?

If you've been approved for a loan and you accept the loan offer, you'll need to sign the loan agreement. This may be sent to you electronically or in the post.

After the lender has received the signed agreement, it will transfer the loan directly to your bank account. This can take anything from a few hours to a few days.

Once you have the money, your first payment will normally be due the following month, unless you have chosen to take a payment holiday, in which case, you will be told exactly when you will need to pay it by.

Find out more about how to manage your loan.

My loan was declined, when can I apply again?

If your application has been turned down, don’t panic. You have other options and it’s important to take your time and understand why it was rejected before you make any new applications. You should:

• Ask the lender to explain why

• Double check your credit report for any mistakes such as wrong addresses

• Hold off making any other loan applications for at least 3 months

Read more about what should you do if your credit application is declined

Can you apply for two loans at the same time?

Although it's possible to apply for two loans at once, doing so is rarely advisable. That's because for each application, the provider does a hard credit check, which is marked on your credit report.

Making several applications for a loan can make you look like you are desperate for credit, which can be a sign of financial troubles. It will also hurt your credit score and make it harder for you to be accepted for credit in the future.

Read more about why you credit record matters