To be eligible for a loan you will need to:
- Be over 18 years old
- Be in permanent employment, receiving a pension or disability benefit/living allowance
- Receiving more than £417 net per month
- Have a bank account with a valid debit card
- Meet the lenders criteria and credit affordability assessment
Do I need a debit card to apply?
This is a requirement of the lender in order to pay the proceeds of your loan. (LightFinance does not charge any fees.)
Borrowing money - what should I do?
You should only apply to borrow money through a loan or any other means if you absolutely need to and do not have any alternative sources of funding. If you do need to take out a loan, you should think carefully about how much you need and the long term cost of making loan repayments before you commit to any borrowing.
You should never borrow more on your loan than you actually require, as (in the majority of cases) this will increase the interest charges and overall cost of the loan. Remember that your loan repayments are likely to continue long after the money you borrowed has already been spent!
Charges and fees
Some lenders may charge up-front fees when you take out a loan with them and these charges should be factored in to the cost of the loan. In some cases fees and charges may be added to the loan, but you should be aware that in such cases these will attract interest charges, which could significantly increase the overall cost of the loan.
Late or missed repayments will also impact negatively on your loan. Apart from lowering your credit score, the lender may also apply additional charges or penalties to the loan. These will usually be added to the loan and, as with any other added fees, will attract interest charges over and above the amount of the penalty itself.
Credit Ratings - How Do They Affect Me?
When a credit agency assigns a rating to someone, they'll take into account a range of information, including past credit history. The final rating assigns the person a certain number that a creditor can then use to determine their risk of defaulting. How a creditor interprets those numbers, however, is up to them. They are not required to accept or deny a loan application based on credit ratings alone.
It's important not to reduce the process of applying for a loan to good credit and bad credit. A creditor can take into account a range of factors - while one direct lender might reject a person for having less-than-perfect credit, another creditor might accept their loan application. There are no "good credit loans" or "bad credit loans," just a range of creditors willing to accept different levels of risk. However, people who have less favourable credit ratings tend to pay more for credit. For example, interest rates for people with lower credit scores may be higher than those with higher credit scores.
My Credit Score
Although taking out a loan is one way you may be able to improve poor credit, you have to be careful. Each loan application can be marked as an enquiry in your credit history; too many enquiries can indicate a need for funds or that you're taking on debts you cannot repay. The initial application process is likely to lower your credit score at first and it will only improve once you have been making repayments on the loan for several months, being able to demonstrate an ability to afford and maintain the regular repayments. Taking out a payday loan is likely to have a detrimental effect on your credit score, even if it is repaid straight away (many mainstream mortgage lenders will now automatically decline a loan application where the borrower has had a payday loan!). Failing to meet payments will negatively impact your credit score and set you back even further. Only take out a loan if you know you will be able to pay back the complete amount during your contractual repayment period.
There are other ways to improve credit, such as paying off bills on time can also help. Whether it's electric, water or credit card bills, paying the full amount on time can show you to be a reliable borrower. Loan companies checking your payment history can see those recent, timely payments and may consider you for a loan with better terms.
Working hard to better your credit score may also give you a better chance for loan eligibility and lower interest rates.
Struggling to Maintain Payments:
If you are struggling to make repayments on a payday loan you should contact your lender right away. You can also get free advice from debt charities like Stepchange, Citzens Advice Burea and the National Debtline
How APR works is best explained with an example.
If you borrow £1,000 on a credit card with a 12% APR, over the course of a year it will cost you £120 (if you pay nothing back). However, as you are likely to have to make some minimum repayments, the total interest you will actually pay over the course of the year will be less than this.
APR is typically added to a debt on a monthly basis, to find a monthly interest rate simply divide the APR by 12. So if the APR is 12% the monthly rate is 1% and if you owe £1000 you will be charged £10 interest each month.
It's also worth noting that the longer the period over which you spread your repayments, the lower the monthly cost but the higher the overall interest paid.
What is representative APR?
You might see the phrase "representative APR" used on lenders' sites. This simply means it's the rate that most customers (that is, more than half) will be offered, although not everybody will get exactly the same rate. You can use the representative APR as a general guide to how competitive a lender is.
The lower the APR of your loan, the less you're paying to borrow.
LightFinance act as a broker not a lender and receive a commission for introducing you to a lender. Information regarding commissions can be disclosed upon request.
What do I do if I have changed my mind?
You can withdraw from your agreement within 14 days of you signing the loan agreement by contacting the lender, email or telephone. If you withdraw from the agreement, you will be required to repay to the lender the credit, and any accrued interest from the date the credit was provided to the date of repaying it, without delay and in any event within 30 days of the day after the day that you gave notice of your withdrawal.