How can I get approved for a loan?

If you’re looking to take out a loan but you’re concerned about being approved, we’ve laid out some of the best ways that you can ensure a successful application.

Pay off your existing debt

When we talk about debt in terms of applying for loans, we don’t mean instalment loans – student loans, mortgages, or loans on a car. The debt that affects your ability to apply for a loan is primarily credit cards and unpaid bills.

Where possible, you should pay off these debts before you apply for a new loan. Try and pay your credit card over the minimum payment each month.

If you’re struggling to pay off your current debts, you can utilise a Debt Management Plan. These plans consolidate all your debts into one monthly payment. You can see whether this is the right option for you here –

Improve your credit score

To improve your credit score, you need to know what it is and why. Programs like Experian show your credit score and what’s bringing it down.

A negative against you can be as simple as not being registered on the electoral roll (register here – Also, you should make sure your contact information is up-to-date.

If you’ve shared bills with someone and they have a low credit score, then your credit may be linked to them. By contacting Experian, you can try and have your scores separated. If there’s a discrepancy on your credit, then you can also contact Experian and try and have it removed if you can prove it’s incorrect. While there isn’t much benefit in paying off instalment loans faster for your credit score (mortgage, student, car loans), paying off a credit card will see an improvement in your overall rating.

Remember, credit records stay on your account for six years, one unpaid bill will linger longer than overdue notices.

Watch your spending

What’s the easiest way to watch your spending? See where you’re spending it.

Print out last months bank statement and pour over it with a highlighter. Tally up items you didn’t ‘need’ to spend; that artisan coffee to fix your caffeine craving or that new pair of shoes. It comes to a lot, doesn’t it?

Next, in a different colour, look at your direct debits and standing orders. Are you using that gym membership that you pay for each month? How about app subscriptions? Are you giving your money to news or wellness apps that you aren’t using?

Give yourself a budget each week – an amount that you allow yourself to spend each month once you’ve counted the essentials for food and travel.

Ask yourself with every purchase, ‘do I need this?’ and if it isn’t essential, then don’t buy it. If you’re a fan of shopping online, save your virtual shopping basket for twenty-four hours before hitting ‘Pay’.

Save money where possible

Once you’ve got your highlighted bank statement, you will see where you can save. You can begin to make your coffee at home, for example.

Open a Monzo account – this is a debit account that works as an app on your phone. Not only does it notify you with your daily spending so you can how you’re doing on your budget, but you can also open a savings’ pot’. These pots round up every purchase to the nearest pound and put the pennies into your savings. So, if you spend £3.50 on a coffee, the spend is rounded up to £4.00, and 50p goes into your savings. After a month, these can tally up.

When you get paid allocate your money for your travel, rent/mortgage, phone bill and any other essentials and then take 10% of the remainder and put it into a savings account or your Monzo pot.

Look at swaps you can make in your life. Can you walk or cycle to work instead of paying for transport? Many employers have a cycle-to-work scheme that lends you the money to pay for a new bicycle, and it comes straight out of your pay-check.

Apply direct with a lender

If you go direct to an FCA authorised direct lender, they are often permitted to give loans for those with bad credit. There are no third parties, so you deal with one company through the entire loan process. By going direct to a lender, you often don’t need a guarantor, and the decision process is much quicker. Depending on your lender, you can apply for your loan, receive an instant decision and receive funding the same day. Also, as there’s no third party, you often won’t have to pay upfront fees, keeping your spending under control.

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Will a payment holiday affect my credit score?

Payment holidays are financial agreements between a lender and a borrower, allowing the borrower to miss scheduled payments on a loan for a specified period of time.

They are most commonly agreed between a mortgage lender and mortgage holder, and with the outbreak of the coronavirus crisis, they have become increasingly popular. They can also be agreed for other loan types too.

A payment holiday can be a great way to take a financial break if you believe that you might miss your next loan repayment. However, in this article, we take a closer look at payment holidays and how they might affect your credit score.


Payment holidays are typically built into most mortgage agreements. They simply allow you to take a break from payments as long as it is agreed in advance with the lender, usually your bank.

Taking a break without an agreement will put you in arrears on your mortgage and this will affect your credit score.

However, an agreement in advance won’t affect your credit score. Payment holidays aren’t exactly advertised by the banks, but in the recent coronavirus crisis, they have become a good way to take a break, and have become widely used by people in financial difficulty.

Loan repayments

Payment holidays can also be taken out on loan repayments, although not all loans have them built-in as a provision.

These can be harder to secure than a mortgage payment holiday, for this reason, and you might need more pressing reasons to stop payments, which will need to be explained to the lender.

If it’s a payday loan or a short term loan, you’re unlikely to get any respite, but if it’s a traditional loan from a bank, then they will be more amenable.

Credit cards and overdrafts

Payment holidays can also be requested for credit card repayments and overdrafts, but again, you need to prove extenuating circumstances. These are being granted frequently during the coronavirus crisis though.

With credit card repayments and overdrafts, the interest that is accrued can be quite high, and this continues to rack up during the payment holiday, so be careful putting these types of payments on hold for a lengthy period of time, as they are only meant to be short term measures.

Will it affect my credit score?

The important thing to note is that you can’t just stop paying for a few months. A payment holiday has to be agreed in advance. When it is, then after the payment schedule is unfrozen, your credit score will be the same as before.

Your credit score will not improve nor will it get worse. If you were on track before the payment holiday with all your repayments, then this will be reflected again. If you were already in arrears before taking the payment holiday, then this will appear on your credit score.

Always check the provisions beforehand, and don’t stop payments until you are certain the agreement is in place, or your score will be negatively affected.

Will I be charged interest?

Most lenders and banks will continue to charge interest when you’re on your payment holiday. This does mean that you will accrue more debt over the holiday period, although as a payment holiday is only a short term measure, this isn’t too much to worry about in the long term.

A payment holiday can be a great way to take a break from your loan repayments if it’s looking likely that you’re not going to make the next deadline. In today’s economic downturn due to coronavirus, payment holidays have even become encouraged, so there’s no reason not to take advantage of them if it can help you financially.

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