It’s the season for all things spooky, but one thing you shouldn’t be scared of is your loan application.
Our Customer Services team talks to 100s of borrowers each week, so they really understand what gives people the chills when they apply for a loan.
Here, they put to rest some of the most common fears they hear from our customers and potential customers.
Scare #1: The rate is a trick not a treat
One of the biggest worries people have is knowing whether the rate they see will be the one they get. Different lenders show you your personalised rate at different times, so it’s important to get your head around the language they use to describe what they’re showing you.
The thing to look out for is where it says ‘headline rate’ or ‘rep/ representative’ APR. Neither are necessarily the rates you’ll be offered for your loan, as the rate you’ll get will be personalised to your circumstances.
Some quick definitions:
- a headline rate is the lowest rate on offer
- a rep APR is the one given to 51% of approved customers. Here’s more info on what an APR actually is.
Scare #2: You’ll mark my credit file, making it harder for me to get a loan in the future
Lenders are obliged to leave a mark on your credit file when you apply for a loan. This is to help the industry make their borrowing decisions.
When you’re shopping round for a loan, you should pay close attention to when the credit search actually takes place. Some loan providers mark your file before giving you a personalised rate, which (as we discussed above) can be different to the one you see advertised on the website.
We don’t think this is fair, so we initially perform what’s called a ‘soft search’. This allows us to give you the actual rate you could borrow at before we leave a mark on your credit file that is visible to people other than you and Zopa. Find out more about Zopa’s soft search.
All we do is view certain information, like your credit history and repayments record – other than registering a search, we can’t change the information on your file. If there is anything you think is inaccurate you should contact the credit bureau in question to get it changed.
Scare #3: Spooky snooping – you’ll dig out the skeletons in my closet
We often request recent bank statements (particularly if you’re self-employed or retired) as part of the checks we do on potential borrowers. We understand that letting someone look through your finances can be nerve-wracking, so we wanted to explain the main things we’re looking for and why:
- Proof of income. We need to make sure you have money coming in regularly so you can pay back your loan.
- Affordability. We take our role as a responsible lender very seriously, and we don’t want anyone to take a loan that they’ll be unable to pay back. Your bank statements let us know whether you’re in the right situation to take on a loan.
The important thing is that your bank statements will be treated with complete confidence and we won’t make any judgements about where you’re shopping.
Scare #4: I’m going to get declined
We know this thought is really scary, but there are various things you can do to help your chances of being approved.
- Make sure you’re on top of your credit score. There are various steps you can take, like making sure you’re on the electoral role, which can make a big difference. Read more about how you can improve your credit score here.
- Make sure all of your credit repayments are up to date, particularly your mortgage.
- Having some existing credit can help. Building a history of managing it responsibly shows potential lenders how you maintain it.
- Don’t leave credit where you no longer live! Make sure you call your loan provider to update the details of where you live. Lots of people forget to do this now because they use online-only services, but even then it’s important that your address is accurate. If you leave a well-managed credit card at your parents when you move out, we might miss that when we credit check you. Likewise, if we spot that you have credit at different addresses, we might wonder why.
Is a loan worry still giving you the chills? Who you gonna call…?
Our London-based customer services team is on hand to bust your biggest loan scares, so give them a call on 020 7580 6060.
And here they are (see - they’re not scary at all!)