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Monthly Archives: May 2016

About Credit Score

# What is my credit score ?

Your credit score is utilized by moneylenders to help them figure out if or not they ought to loan to you. It depends on loads of various things, including whether you’ve been late with or missed any obligation reimbursements previously, and in addition the quantity of credit records you’ve opened before.

You are viewed as generally safe by banks in the event that you have a high financial assessment, which implies any applications you make are prone to be acknowledged. In the event that you have a low credit score rating, then banks will consider you to be a more serious hazard, and any applications you profit are liable to be won’t.

# How is it arrived at?

As well as information from the electoral roll, which provides evidence of your identity and address, your credit rating will be based on how many credit accounts you already have – and how well they are managed – as well as anyone else you might have financial links with. So, for example, if you’ve ever taken out a loan in joint names and they have defaulted on repayments, this could have a negative impact on your credit score.

Any county court judgements (CCJs) made against you, as well as if you’ve ever been made bankrupt or if you’ve had an IVA, will also have a bearing on your credit score.

Lenders will also obtain information from other companies you might have borrowed from in the past to see whether you have missed any payments in the past, or if you only repay the minimum every month.

And they will look at how long your credit history is, so if you’ve been a borrower for a number of years and have always made payments on time, they are likely to look on you more favourably than someone who has only borrowed once or twice relatively recently.

# Why does my score matter?

Lenders actually employ their own scores that you must meet if you want to borrow from them. Each lender will use slightly different criteria and scores required can even vary between different deals offered by the same lender –the best ones needing the best scores.

When a lender accesses your credit score (from one of the credit reference agencies such as CallCredit, Equifax or Experian), it may or may not meet the requirements of that particular lender for that particular deal.

# Where can I find out my credit rating?

You can get hold of a copy of your statutory credit report for £2 from any one of the three main credit reference agencies, Experian, Equifax or CallCredit. You can also pay more for monthly online services which you can access when you want and will send you an alert should anything change on your report.

# How can I improve my credit score?

There are plenty of things you can do to improve your score. First, make sure you are on the electoral roll at your current address, as companies will check this when you make credit applications.

You should also check that any information held on you is correct and up to date. For example, if your report shows a missed payment and you can prove you didn’t miss one, you should alert the company involved and ask them to amend the information on their report. If they don’t do this, you can put a ‘notice of correction’ on your report explaining what happened and why the information in your report is wrong.

# Close down any credit accounts you no longer use, as having lots open could harm your credit rating.

 Don’t make lots of applications in quick succession either, as this will ring alarm bells with lenders. If you are planning on making more than one credit application, space them out, otherwise it could look as though you are struggling financially.

# And finally…

Remember that because lenders calculate credit scores differently, even if you don’t make the grade for one lender, another might still be prepared to offer you credit.

Personal Loan, Is it Works?

# Competitive interest rates

Thanks to low interest rates, taking out a personal loan could be a lot cheaper than you think.

IKANO Bank, for example (which is owned by the family that founded IKEA), is currently offering 3.2% APR representative on borrowing of between £7,500 and £15,000, so long as you repay this over one to five years.

Sainsbury’s Bank also offers 3.2% APR representative on borrowing of the same amount, but you’ll need to repay it over one to three years and apply before 10am on October 6. You’ll also need to have a Nectar card to qualify.

If you don’t have a Nectar card, or you want to borrow over four to five years, you’ll pay 3.3% APR representative.

HSBC and M&S Bank also both offer 3.3% APR representative on borrowing of between £7,000 and £15,000 with HSBC and between £7,500 and £15,000 with M&S. With HSBC you must repay your loan over one to five years, with M&S, this rises to one to seven years.

Should you need to borrow more than £15,000, Sainsbury’s Bank is currently offering 3.2% APR representative on borrowing of between £15,001 and £19,999 taken over two to three years. Again, this is so long as you apply before 10am on October 6 and you have a Nectar card.

If you don’t have a Nectar card, or you want to borrow over four to five years, the rate rises slightly to 3.3% APR representative.

If your borrowing requirements aren’t quite so large – say you want to borrow between £5,000 and £7,499 – rates are still competitive, but tend to be higher. This means if you’re borrowing towards the end of the loan bracket (£7,000, for example), it can sometimes work out cheaper to borrow more and qualify for a lower interest rate.

IKANO Bank offers 4.1% APR representative on loans of between £5,000 and £7,499 repaid over one to five years.

And Sainsbury’s Bank offers 4.2% APR representative on borrowing of the same size repaid over one to three years. You’ll need to be a Nectar card holder to qualify.

# Fixed monthly payments

Another advantage of personal loans is that they allow you to make fixed monthly payments, which means you know exactly how much you’re repaying each month.

Not only does this help you to budget, you can be reassured that once you’ve met all of these repayments, your loan will be paid off in full.

For example, if you borrowed £8,000 over three years with IKANO Bank at 3.2% APR representative and an annual interest rate of 3.15% fixed, you’d pay £233.19 per month for 36 months. The total amount of interest you’d pay would be £394.95, making the total amount repayable £8,394.95. (Note this is a representative example.)

# Flexibility

Personal loans also offer the flexibility of allowing you to choose how long you need to pay back what you owe. So if you’re borrowing a fairly large sum, you can choose to spread your repayments over a number of years, making it far more palatable.

What’s more, some providers, such as Sainsbury’s Bank, offer the option of a payment holiday of two months at the start of the agreement. Be aware though you will be charged interest between the start date of your loan and your first monthly payment.

# What to watch out for

When comparing loans, there are a number of things to look out for before you sign on the dotted line. These include:

– A fee if you choose to pay off your loan early – often this is around two three months’ interest.
– An arrangement fee for taking out the loan.
– You may receive a higher interest rate than the one advertised. This is because the APR is representative so only has to be offered to 51% of applicants.

Also be aware that if your credit score is poor, perhaps because you’ve defaulted on debts in the past or had a County Court Judgment (CCJ), lenders are more likely to turn you down.

It’s therefore a good idea to use our Smart Search tool which will give you an idea of how likely you are to be accepted for a loan before you apply, without leaving a mark on your credit report.

Know The Basic of Loans

loans# What is an personal loans?

An individual advance is otherwise called an unsecured advance and is a method for acquiring cash from a loan specialist, for example, a bank or building society. You pick the sum you wish to obtain and the timeframe you need to get it over inside given parameters. The bank will then choose whether or not to acknowledge you as a client on those terms, in light of your financial assessment.

Unsecured individual credits, with which you don’t need to set up a property as security, are by and large accessible for measures of amongst £1,000 and £25,000 over terms of one to five years – however 10 years is now and then conceivable. Be that as it may, they are for the most part at their least expensive for amongst £7,500 and £15,000 over somewhere around three and five years. In any case, you make standard month to month reimbursements to pay back everything of capital in addition to enthusiasm at the concurred rate.

# What is a secured loan?

With secured or homeowner loans, you have to use your property as security against the loan.  This means that they are only available to homeowners, and that if you default on your repayment you could lose your home.

You can borrow up to £100,000 with a secured loan and the maximum amount of time for repaying the loan is a lot longer at 25 years. Loans of this kind are therefore suitable for those looking to borrow larger amounts. As with personal loans, the repayment terms will generally involve fixed, monthly payments.

# What other types of loan are there?

You may see loan providers talking about car loans or home improvement loans, but there are just unsecured, personal loans by another name.
The same is true of the loans offered by peer-to-peer lenders, the difference being that you borrow from other individuals keen to earn interest on their savings.

# What factors affect the cost of a loan?

When choosing a loan, the first aspect to look at is the interest rate. The higher this is, the more you will pay back overall. And the bad news for people with low credit scores is that the lowest interest rates are generally reserved for borrowers with higher scores because they are seen as less of a risk by lenders.

Other factors to check include whether there are any fees, such as early repayment or arrangement fees that could affect the overall cost of the loan.
Finally, compare loan conditions before making your choice – some are more flexible than others and may even offer the option of a payment holiday of say two or three months at the start of the agreement.

# Will I qualify for a loan?

As explained above, whether or not you qualify for a personal loan will depend on your credit score. If you have a low score, for example because you have defaulted on debts in the past or had a County Court Judgment (CCJ) recorded against you, it is therefore unlikely that you will be accepted by lenders offering top deals.

You can take steps to improve your situation by applying for a copy of your credit report to check all the information held is accurate. You should also stay on top of all your bills and debt repayments. Secured loans can be a good option for anyone whose low credit score makes it hard for them to get a low-rate personal loan – so long as they are a property owner. But remember your home will be at risk.

# What is the representative Annual Percentage Rate (APR)?

The representative APR quoted in loan advertisements is the headline interest rate figure the lender uses for marketing purposes. This does not mean that everyone who is accepted as a customer will pay that rate, though.

Many lenders calculate the APR of a personal loan using a system called risk-based pricing, which means the rate you are offered depends on the strength of your credit profile. And under current European Union rules, lenders only have to offer this rate to 51% of the people they take on as borrowers. The remainder can be offered a higher rate, which they can then choose whether or not to accept.

# What are early repayment penalties?

Early repayment penalties, or redemption fees, are generally charged when borrowers want to repay their loans before the agreed term to compensate the loan provider for the resulting loss of interest.

A typical penalty could be equivalent to one or two months’ interest, although the penalties charged will often fall towards the end of the loan agreement.
Those keen to avoid redemption fees should look for flexible loans that can be paid off early penalty-free.

# What is Payment Protection Insurance (PPI)?

PPI is designed to pay your loan, mortgage or credit card repayments if you fall ill or lose your job. However, the terms and conditions of the cover tend to be very strict and riddled with exclusions. And in the past, lenders have come under fire for insisting that borrowers take out linked PPI policies alongside their loans.

Most providers no longer do this, but if you are offered a PPI policy, it is worth remembering that standalone cover should work out cheaper and will also protect all your debts, rather than just this loan.