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How to apply for a loan

Our simple step-by-step guide to applying for a loan

published: 19 July 2022

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

A loan can give a helping hand – for a new car, home improvements or your dream wedding. But taking out a loan can be a large 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. There are also loan providers who cater specifically for people with bad credit 

  • 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 many applicants could be offered higher rates. The rate you get will depend on your own financial circumstances and credit score 

  • 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

Am I eligible for a loan? Whether you’re eligible for a loan in the UK will depend on a number of criteria, such as: 

  • Proof of address. You’ll need to show you’re a UK resident. Loan providers may also ask where you’ve lived for the past three years 

  • Being aged 18 or over. Most loans have a minimum age of 18, so you’ll need to show your date of birth 

  • Proof of income. You’ll need to show you have enough money coming into your account to afford the repayments 

  • Proof of affordability.  As well as checking your income, lenders may also want to know what outgoings you have, such as other loans, childcare costs or car finance for example. This is to make sure you’re not stretching yourself too thin 

  • Your credit score. How you’ve handled borrowing in the past can affect whether you’ll be eligible for a loan. If you have a low credit score, deals may be more limited or expensive, and you might not be able to borrow as much   

  • Loan provider’s own criteria. Loan approvals differ slightly from lender to lender. For example, some may be stricter in terms of affordability 

Woman using laptop smiling

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 UK 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 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, such as a car or home improvements. Try not to borrow more than you need as you’ll be paying interest on it. The lender is likely to ask you what you want the loan for when you apply 

  2. Decide how long you need to pay it 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 

  3. 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 

  4. 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 

  5. Choose your provider: You’ll need to decide which lender you want to borrow from – different lenders offer different deals and interest rates 

  6. You’ll receive the loan money: Once you’ve been accepted for the loan you should receive the funds directly to your bank account. How long it will take to receive the loan will vary depending on your lender, so if this is important check with the provider 

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 borrowing. 

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 if I am unemployed? 

Yes, you can apply for a loan if you are unemployed although you might be restricted in the deals that are available, you might not be able to borrow as much, and the interest rates might be higher. 

One of the main criteria loan providers have is making sure you can afford repayments and for this, you usually need to show you have a steady stream of income.   

If you are on benefits, you may be able to get an emergency government loan. 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. 

How long will it take for me to receive the money? 

It depends on the loan provider, but once your loan application is approved the money can be in your bank account fairly quickly – usually within a few days. 

Start your loan application 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 and we’ll tell you your chances of being accepted for different loan deals. 

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

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. 

Frequently asked questions

What can I apply for a loan for?

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

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 recently struggled with debts. 

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

How long can I borrow for?

How long you can borrow for (the term of the loan) can make a big difference to your monthly repayments. The longer the term, the smaller your monthly repayments will be, but you’ll be paying off your loan for longer – andyou’ll pay more interest overall. Loans differ in length. You can usually choose your loan term. It could be as short as three months, or it could run to five years or longer. 

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