Loans Based on Affordability
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When you apply for a loan in the UK, whether it’s a personal loan, auto loan, payday loan, or any other type of loan for that matter, the lender will typically run a credit check on you. The process entails pulling out a copy of your credit file from UK’s main credit reference agencies like Callcredit and Crediva so the lender will have a glimpse of how you used and managed debt in the past.
Lenders will use your credit history as barometer on how you are most likely to handle the loan agreement that they will offer you once they approve your application. So if your history reflects late and missed payments or worse, loan defaults, lenders will be reluctant to grant you the funding that you requested for out of fear that you will repeat the same problems that you have made in the past.
But nothing is constant and the person that you were before may not be the same person you are now. Today, you could be in a better financial position and all the past mistakes have made you a wiser and more disciplined individual. And this time around, you are determined to pay off your loan according to the agreed terms and conditions come hell or higher water.
Now if you want another shot at taking out a loan but you fear that your past credit history will get in the way to land an approval from a reputable lender, then loans based on affordability could be the answer to your problem.
How Loans based on affordability work
Loans based on affordability are designed to provide funding to people who have the financial means to shoulder a loan and its repayments but do not have the proper credit standing to qualify for traditional forms of loans from banks and credit unions. Because instead of checking your credit history, loans based on affordability will look at your earnings and outgoings in the past six months to determine whether or not you are qualified to obtain credit.
Any and all earnings and outgoings will be put into account. Income coming from benefits, wages, part time gigs, business profits, and anything that generates money for you will be considered and so will your entire costs from rent, utility bills, and the like. After the lender has gathered all these vital information, the company will then make a calculation if your current financial standing is ideal for the kind of loan agreement that they will grant you.
Normally, there two ways in how you can complete an eligibility check for loans based on affordability:
- Online check – The process can be done remotely, anywhere and anytime, as you will be submitting an application on the lender’s website. Once you have completed all the information in the online application form, the lender will then conduct a check to verify its authenticity and then determine if you can afford the loan based on your monthly earnings and outgoings.
- In a physical location – Affordability checks for the loans can also be conducted right at your home just like with doorstep loans or at any of the lender’s physical stores in the case of payday loans. Once you pass the check and your application is approved, the loan will then be handed to you in cash right then and there.
What loans based on affordability will require from you
Now it’s important to remember that every loan in the UK will require some form of credit check to determine if an applicant is eligible or not. It’s not only necessary in the part of the lender but on you as the borrower as well as it will guarantee that the credit agreement is something that is suitable to your financial circumstances. The FCA or Financial Conduct Authority also requires lending companies in the UK to complete a thorough credit check before approving a borrower’s loan application to minimize problems and complications.
In the case of loans based on affordability however, the lender will not conduct any form of check on the applicant’s credit history but on other aspects like income and employment to come up with a calculated decision on whether or not a particular the person is eligible for the type of loan product that is being offered.
Some of the information that will be required from you when you apply for a loan based on affordability includes:
- Identification – This basically covers your real name, gender, and all those other information that are featured in your ID.
- Address – The exact information of your place of residence is required to adhere with the United Kingdom’s policies to combat identity theft, fraud, and money laundering. So your application won’t run on some problems, your present address information must be identical to that on your bank account.
- Monthly earnings – Since loans based on affordability are not dependent on your credit history but on your present financial capability, the most important requirement that you need to satisfy is proof of monthly earnings.
Reasons why loans based on affordability are the perfect loans for you
For many people in the UK, loans based on affordability are the ideal forms of financing because of several reasons that include:
1.) Bad Credit Rating
If you are someone who has had credit issues in the past and banks, credit institutions, and other conventional lending institutions won’t allow you to take out any of their loan products because of it, then loans based on affordability are options you can consider simply because the financial products won’t discriminate you based on your credit rating.
Do you feel that credit checks are an attack against your own personal privacy? If you are not comfortable with the idea of having your credit file being scrutinized by a lending company that you hardly know of then loans based on affordability should work best for you.
3.) Rebuilding your credit score
Because you can get approved even if you have bad credit, loans based on affordability can be a viable means to build your credit rating back to positive levels. This is of course dependent on the condition that you stick to your repayments according to the agreed terms.
305.9% APR. £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)
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Rates from 45.3% APR to 1575% APR – we provide a no obligation quote, your APR will be based on your personal circumstances