It is always suggested that you know you arecompletely eligible for the loan before putting in the application. If a lender finds that you cannot afford to pay back what you are borrowing, your
application will be straightaway cast aside causing your credit score to drop by a few points.
Further, these hard inquiries will show up on your credit file for two years affecting your ability to borrow money at a lower interest rate. Of course, at the time of applying for these loans, you would like to be sure about your affordability, so a lender does not turn you down.
How to check your eligibility without affecting your credit score
You normally get to know about your affordability whenyou put in the application, but unfortunately, it can ding your credit rating. Well, there are three ways to check your eligibility for a personal loan
without a losing credit point:
- Usean online calculator
Using an online calculator can tell you if you can afford to pay back what you are borrowing. Various lenders have a standard epitome of a loan calculator on their websites that you can use to know how much it will cost you in total and what the size of monthly payments will be.
An online calculator will give you an estimation asthe actual rate of interest varies because of associated fees. Ask yourself if you can repay bigger monthly payments. The actual payment will be larger than the estimated one, so include the scope of extra payments. You should drop the
idea of borrowing money if you cannot even smoothly meet payments up to the
size of estimated ones.
- Checkyour credit score
A lender will surely check your credit rating as itlets them know about your loyalty. A good credit score indicates that you have been loyal to all of your payments and hence they lend money at lower interest rates. However, you do not need to approach them to know your credit score.
Get a free copy of your credit file from all credit reference agencies to know your credit rating. However, you can get a free copy only once a year and then you will have to pay nominal fees for each request.
It is suggested that you look over your credit report periodically, at least within a period of three months, so you have sufficient time to improve your credit score before you apply for the loan.
- Geta pre-approval letter
Using an online calculator and checking your credit score yourself may not be enough to exactly know if you will be allowed to borrow money. Here comes a pre-approval letter. You should try to get a pre-approval letter from different lenders.
This will help you know your borrowing capacity andthe size of monthly payments. As you will get an idea of interest rates charged by different lenders, you can choose the most competitive deal.
However, note that the actual interest rate may varyas a pre-approval letter is sanctioned without running a hard credit check. Private lenders in the UK run softinquiries to determine your affordability and they do not show up on your credit file.
Is it possible to get a personal loan with no credit check?
The three methods mentioned above can help you determine your eligibility for a personal loan without a credit check, but some people actually want these loans without a credit check. Getting a personal loan with no hard inquiries can be difficult if you are borrowing a large
amount of a loan.
For instance, personal loans for 12 months are big loans, so a lender must want to check your credit score. However, if you are looking for a small personal loan that is not subject to a longer repayment period, you can see these loans without a credit check. These small personal loans are also known as cash loans and payday loans are a part of it.
You just have to let a lender know how much you wantto borrow and then the lender would lend money. However, it does not mean that the lender will not analyse your repaying capacity. A lender will determine your affordability by looking into your current financial statement.
No credit check loans also come under this category. Such small loans may not be more than worth £2,000. You will be required to settle the whole dues at once, probably within a month. A few lenders can allow for weekly payments. Here are the benefits and drawbacks of these loans:
- You can get these loans instantly without further dinging your credit score.
- As you are borrowing a small amount of money, you can easily pay it off on the due date, and if payments are weekly, it makes the repayment easier.
- You do not need to fear risking your financial situation as the repayment length is not long.
- Interest rates will be high, so it will cost you more money than standard personal loans.
- If you have not prepared your budget, you will likely end up digging yourself deeper into financial chaos.
- If you have secured a loan as in the case of pawnshop loans, you will lose your valuable asset.
Well, whether you need a small or large amount of money, you should have a strong credit rating to avail yourself of competitive interest rates. You should try to avoid loans with no credit check as they can be outrageously expensive and a threat to your finances down the line.
The bottom line
It is always a smart move to check your eligibility before applying for a personal loan as it can keep you from affecting your credit score. Check your credit report before borrowing money so you do not
face any rejection. Use an online calculator to see how much it will cost you.
This will help determine if you can pay back this much money. Get a pre-approval letter because this will help you know before hand how much you can borrow without affecting your credit score.
Description: You can examine your affordability for a personal loan by a self-check of your credit report, online calculator and a pre-approval letter.