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How to apply for a loan

Our step-by-step guide to making a loan application

Find out more about getting a loan, from choosing the right provider to how it affects your credit score

By Lucy Hancock

Published: 13 October 2021

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A loan can give a helping hand – for a new car, home improvements or your dream wedding. But taking out a loan is a big financial commitment. You’ll be paying interest on your borrowing and personal loans can last a number of years. It’s important to think about the process of applying for a loan and what it’s going to cost you.

What to consider before applying for a loan

Before you begin your application, you should consider the following questions to make sure a loan is the right option for you:

  • Do I need the loan? Think carefully about whether the borrowing is affordable. Would you have the time to save the money instead or do you need funds more urgently? If you’ve had debt problems in the past, is it a good idea to take on new borrowing?
  • What is my credit score? Applying for loans or credit leaves a mark on your credit report – if you’ve been rejected for a loan recently, you might be better off trying to rebuild your credit score before trying again
  • Will I get the advertised rate? You might not get the interest rate advertised by the lender. Lenders have to offer their advertised rate to a minimum of 51% of their customers – but that means almost half of applicants will be offered a higher rate. The rate you get will depend on your own financial circumstances
  • Are there any fees or charges? It varies by lender and loan product, but you should be aware of any possible fees or charges you might face – for example, administration fees, late payment fees and early repayment fees

What information do I need to apply for a loan?

When applying for a loan, lenders are likely to ask for the following information to support your loan application:

  • Your bank details: Make sure you provide the details of the account you want the loan to be paid into
  • Your current address: You’ll need to provide your current address and previous addresses of the past three years
  • Details of your employment: Lenders will ask to see proof of income, so they can see you’re able to pay the loan back. Are you currently unemployed? You may still be able to borrow, but your options may be more limited Personal details: Lenders will need your full name and date of birth (you’ll need to be at least 18 years old to apply for most types of loan)

How do I apply for a loan?

Applying for a loan is usually a straightforward process. Decide how much you want to borrow then you can compare deals with MoneySuperMarket. We’ll show you loans from leading providers across the market by term and amount, to find the best deals to suit your needs.

Here, we’ve outlined the step-by-step journey to applying for a loan:

  1. Decide what you want the loan for: Are you taking out a loan to help pay for your upcoming wedding? Need to borrow to help fund your home renovations? You’re likely to be asked what the loan will be used for when you apply
  2. Decide how much you need to borrow: You could be after a smaller loan for emergency funds or need to borrow a larger loan for a bigger purchase. Try not to borrow more than you need as you’ll be paying interest on it
  3. Decide how long you need to pay if off: Are you able to pay the loan off quickly or would you prefer to spread out the cost over a few years? Just be mindful of interest added over time which could make your loan more expensive. Our loan calculator can help you work out how much a loan will cost – for different loan sizes and terms
  4. Provide your personal and financial details: Lenders will ask for some of your personal details, including proof of income so you can show you’ll be able to repay the debt
  5. Deals are shown with eligibility: When you compare loans with us, we’ll show you your chance of being accepted so you can apply with greater confidence
  6. Choose your provider: You’ll need to decide which lender you want to borrow from – different lenders offer different deals and interest rates
  7. You’ll receive the loan money: Once you’ve been accepted for the loan you should receive the funds quickly. How long it will take to receive the loan will vary depending on your lender, so if this is important check with the provider

What can I apply for a loan for?

A loan can be a way to help you afford something sooner - to pay for a holiday or to consolidate existing debts, for example.

While it’s always cheaper to pay for something outright – especially if you’ve struggled with bad credit in the past, a loan can serve as a helping hand if you’re looking to spread out the cost of a larger purchase or need access to money quickly.

You can use a loan for a range of purposes including: spreading the cost of a car, to help make home improvements, to buy a property more quickly (by using a bridging loan), to help pay for a wedding, to help fund your next holiday and to help consolidate existing debt to reduce the interest you pay.

How much can I borrow?

How much you can borrow will vary by provider and your credit history – some lenders may be hesitant to lend you a large sum if you’ve struggled with debt in the past and have a low credit score.

The typical loan amount can be anything from £1,000 to £15,000, depending on what you’re using the loan for. If you’re looking for a loan larger than £15,000, it’s possible you may need to look at secured loans rather than a personal loan.

A secured loan involves putting up a valuable asset, such as your car or home, as security in case you struggle to pay the loan back. But remember with a secured loan, if you can’t repay the debt you could risk losing your home.

How long can I borrow for?

How long you can borrow for (the term of the loan) can make a big difference to you monthly repayments. The longer the term, the smaller your monthly repayments will be, but you’ll be paying off your loan for longer - and you’ll pay more interest overall.

The below table shows the average amount that people borrow for different loan terms:


Loan term (years)

 

Loan amount

£3,000

2

£5,000

3

£8,000

4

£11,000

5 £14,000
6 £17,000 
7 £19,000
8 £21,000
9 £22,000
10 £28,000

*Data collected between January and September 2021, accurate as of October 2021

Can I apply for a loan with bad credit?

If you’ve had debt problems in the past, or have a low credit score, your choice of loans could be more limited. But this doesn’t mean an instant ‘no’ to getting a loan.

There are specialist providers that offer loans for bad credit, aimed at those with a poor or limited credit history so it’s easier to be accepted. But they tend to have higher interest rates and lower borrowing limits than standard loans.

With MoneySuperMarket, you can compare loans for bad credit from across the market. We perform what’s known as a ‘soft search’ to see what loans you could be eligible for – and searching won’t affect your credit score.

Looking to improve your credit score? Our free credit monitor service can help by showing you your credit rating and offering tips on how to boost it to unlock better loan deals.

Can I apply for a loan on Universal Credit?

While you may struggle to apply for a personal loan while on Universal Credit, you may be able to get an emergency government loan if you are receiving this benefit. For those claiming Universal Credit it is known as a ‘budgeting advance.’

A budgeting advance can be used for specific costs, such as replacing a broken fridge or expenses involved in getting a new job. Eligibility criteria will apply and you’ll repay the money through reduced payments to your Universal Credit.

What happens after I apply for a loan?

Once you’ve completed your application your chosen lender will conduct a credit check to assess whether you’ll be able to pay back the loan. It’ll use information from your credit file to make a decision and - if it agrees to advance you a loan – what interest rate you’ll get. The better your credit history and score, typically the lower your loan rate.

If you’ve been accepted the lender will send you the loan agreement – usually either electronically or by post – for you to sign and send back. You should receive the money in your account within a few days.

Ready to compare loans with MoneySuperMarket?

Applying for a loan can feel like a guessing game – it’s hard to know whether you’ll be accepted and what deal you’ll be offered. But by comparing loans with MoneySuperMarket it’s quick and simple.

We compare loans from a wide range of lenders across the market. And for each loan, we'll show you your chances of being accepted. Searching for a loan with us won’t affect your credit score.

Ready to compare?

 

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.