When you consult with a loan provider or comparison site about a loan that you need a quick decision on, it’s a good idea to have as much information provided as possible.
Some factors can affect the outcome of this decision.
Some worry that doing multiple checks with different providers will have a negative impact on their chances of getting a loan approved, but you can get a soft credit check which can be more beneficial to you.
Read on to find out what an instant decision loan is and what you need to provide to get quick and better results.
Instant Decision Loans, Explained
These types of loans come under different names, from payday loans, bad credit loans, personal instalment loans, and even car loans in the form of finance.
Each category may have its own eligibility criteria you must meet for the decision to be in your favour.
Part of this criteria is that you have to be subject to a soft check which looks at your credit score, as all lenders in the UK need to be regulated by the FCA to be able to provide a decision or a loan offer in the first place.
The decision you get can be offered the same day, or it can take up to twenty-four hours before you are given a decision on the loan you’ve applied for.
If you’ve passed these checks and accept the loan, the lender will carry out further checks like affordability and employment.
What Can Affect Your Loan Application
This depends on your credit score, which can be affected by things like credit cards, finance, missing payments, new bank accounts, applying for credit too often, bankruptcy, and even borrowing more than you can afford.
While having any of these means your credit score can be severely impacted and may give you a limited amount of loan offers or ones with looser eligibility and higher interest rates.
This score determines how likely you’ll pay back the loan.
Let’s say you’re worried about a missed payment over six years ago. In that case, the lenders tend to be more interested in your recent history and things like occupants in your home.
Comparing credit offers won’t affect your score or the likelihood of getting accepted.
It’s important to note what service you measure your credit score with as each provider has its own metrics, so one site could be your score out of 800 or out of 1000, so bear this in mind when deciding which credit report to consult with.
Should I Look Through A Comparison Site?
When using a service like moneysupermarket.com, you can get a quick decision that will provide you with a list of lenders that are likely to offer you the loan, and here you can fill out your details and detail what it is you need the loan for.
The good thing with these types of sites is that you can provide how much you would like to borrow and for how long you think it will take to pay back, as well as your employment status or whether you’re a homeowner to get a tailored loan that fits your needs.
This means you can be preapproved for a loan, which means you’ll know the exact loan amount, the duration, and the interest amount so that you won’t find any hidden fees.
You will also be provided with offers for which you fit the criteria or are more likely to be accepted.
Why Would Someone Need This Type Of Loan
These same-day loans can put people off compared to the standard loan offer.
Some people may prefer a more comprehensive credit check before the loan is offered, as depending on the type or purpose of the loan, your financial position may change during the duration of the loan.
Those who need funds quickly for an unexpected cost like a house repair or some may even use a loan like this to pay off multiple debts and want the total to be under one monthly payment.
However, this can be risky depending on the amount of interest associated with it.
You should also be aware that even though you may be approved for a loan, it might not mean that you a preapproved and may have to apply to see what the criteria are, though you aren’t obligated in any way to accept the first offer you come across.
How Does APR Factor In?
This is where these types of loans can become an issue, ranging from 6-36% APR for a personal loan, which can be worked out monthly.
So even though you might be able to manage payments on the sum borrowed, you have to consider the interest added.
The worst offender for this interest is through credit cards, which can charge in the hundreds and even thousands of per cent APR each month, which is why for any loan, it’s essential to research and find the best rates that fit with your payment strategy.
If you have a good or excellent credit score, you might find better deals, and in some cases, you can find APR amounts that are fixed for the loan repayment period, as things like inflation can affect these rates on a yearly basis.
Considerations Before Taking Out A Loan
Your Employment Status
It can be hard to predict the long-term, but you can consider your financial position by looking at the type of employment you’re in and any savings you may accrue over this period.
If you have precarious working hours, which differ each month, you may want to consider getting a more consistent position, as a credit check will likely ask how much you make per annum and how many hours you work per week.
It’s not great to consider losing a job or having an unexpected cost come up, which is why managing your money and having an emergency fund can be useful for these circumstances.
The Amount You Borrow
Consider only borrowing what you need and not a slightly higher amount, even if you think you can afford it.
Even though the monthly amount may be lower, you may find yourself paying it back over a longer period.
This is why being realistic with what you need is really important, as well as only applying for loan offers you are confident with.
If you reject a loan offer once you’ve been preapproved, this will void the offer and negatively affect your credit score.
You should also think about what your credit score looks like and improve it if you can, as this way, you’ll be able to find the most competitive rates that are more favourable to your position, as in some cases, these types of loans should be a last resort.
Using comparison sites as well as money advice specialists should give you a good idea of how to proceed as you may be able to find other methods of managing your finances, so they go further.