Unsecured Loans - What is My Credit Rating?
The chances are that if you’re reading this, you are either already in the process of applying for a loan or have already applied for an unsecured loan but have had some difficulties in being accepted, right? You might be wondering whether these difficulties have something to do with your credit rating? You could be right, but even if you’ve never missed any repayments in the past, it still doesn’t guarantee that your credit rating will enable you to borrow the money from any lender.
Firstly, there is a difference between your credit history and your credit rating. With your credit history, every time that you apply for a new form of credit: mortgages, secured loans, unsecured loans, tenant loans, credit cards, store cards, catalogues etc, you will create a record of your application which will be available for viewing (with your consent) from one of the major credit reference agencies such as Experian or Equifax.
Lenders will want to have access to your credit history when you apply for any form of credit as it provides them with a good indication of their potential risk in lending you the money in the first place. The reason for this is that the credit history also shows each and every repayment that you make on your existing credit and every arrear, default and CCJ (County Court Judgement) against you. In this way, your credit history is a very valuable tool for assessing the likelihood of you defaulting in the future, however it is not the only tool that the lender will use.
It is highly probable that the lender you apply for your unsecured loan or tenant loan to will ask a lengthy series of financially related questions through the course of your application. They may want to know about your residential status and how long you have lived in your current property. They may want to know about your citizenship, your income and your outgoings. Each of these questions allows them to build up a picture of their view of your credit worthiness. The answers you provide will be converted into a points score and the number of points you have at the end of the process will show the lender your credit rating and they can then decide whether they will lend to you or not.
Don’t be misled however, as even if you have never missed a repayment in your life doesn’t guarantee that the lender will give you a ‘great’ credit score. Each lender is different in the way they apply the scoring system and one lender may apply a very different score for you compared to another. In this way, it could be regarded as somewhat of a myth that you even have a credit rating because every time a new lender produces one, it is very likely to be different from the last even though your financial circumstances haven’t changed.
Another thing to consider is profitability. Some lenders will specifically target low risk customers – those that have never missed any repayments before. Others wil target customers who almost habitually have late payment problems etc. They apply an interest rate to each type of customer and clearly those that can be regarded as carrying a greater risk of lending to, will attract the highest interest rates. It is the interest rate that carries the level of profit for the lender.
So just because you have been turned down by one lender may not necessarily mean that you may be turned down by them all. It may be that you simply don’t quite fit their credit rating profile for their profitability model.Tenant loans and unsecured loans are affected greatly by this type of financial modelling, but don’t let one bad experience put you off from applying. Just be honest with yourself about your credit history and your current circumstances and try to approach a broker or lender that concentrates their energies on in this area. Happy hunting!
Unsecured Loans - Using Tenant Loans for Debt Consolidation If you’re a tenant and you have a few different pieces of credit that you have to organise repayments for each month, you’re probably thinking like many other thousands of people up and down the country, that debt consolidation could be one way to regain control of your finances.
Firstly, what is debt consolidation? In today’s modern world, where the pace of life seems to get faster and faster, consumerism rules. People want the good things in life now and definitely aren’t prepared to wait and save up for them. Credit has become an integral part of the fabric of our lives. The range of credit available is also now much wider than ever before. We have:
Equity Release Calculator
- Mortgages
- Secured Loans
- Unsecured Loans
- Credit Cards, and
- Store Cards
…to name but only a few. They allow us freedoms that our parents and certainly our grandparents never dreamed of but then again, they all have to be repaid and that is where it starts to get a little tricky.
If you rent your home and your thinking about debt consolidation, you’ve almost certainly got a mixture of unsecured loans and tenant loans but you may also have credit cards and store cards that you use to provide you with short term credit. Each of these requires managing each month. You need to organise a repayment at the same time without ever forgetting any one of them as this could give you a much more serious problem the next time you wanted to apply for finance as your credit history could be adversely affected by any missed or late repayment. Pretty much all lenders will require your permission to check your credit file with one of the major credit reference agencies such as Experian or Equifax so that they can judge what your recent repayment history has been like. This helps them decide how much of a risk you are if they lend to you again in the future. Late payments and defaults will show up on this record and may not help you when you come to apply for finance again.
Debt consolidation can often help by providing a vehicle to bring all of your unsecured loans, tenant loans and credit cards into one. You apply for another unsecured loan in order to repay all of your outstanding credit, thereby leaving you with only one loan to repay each month. Only having to think about one repayment can make it much easier to manage.
It can also help by potentially reducing the amount of your outgoings each month. With credit cards and store cards in particular, there is a strong probability that you if you are not clearing the balance each month, you are paying a comparatively high amount of interest each month. By taking out an unsecured loan to pay off these cards, you are likely to have reduced the level of interest you will be paying. If you extend the term of the loan, then you could reduce the amount of money that you would be paying each month as well although this could increase the total amount you may be repaying over the full term of the loan. You may decide that because you have more money available in your pocket each month, things are once again much easier to manage.
Debt consolidation can be very useful to a great number of people and using unsecured loans or tenant loans to do it is a generally accepted method of enjoying all of the advantages that it could bring.
Debt Consolidation – a Popular Purpose for a Secured Loan
Credit has become a way of life for many people in the UK. Secured loans, unsecured loans, credit cards and store cards are commonplace and the amount of credit that exists, may be at different rates of interest. Some of these loans may be subject to comparatively high interest rates. It is understandable then, why so many decide to consolidate this credit into one more manageable monthly repayment.
Only One Repayment, And Cheaper Too!
Rather than have several cheques to write or direct debits to set up, many people decide to consolidate their debt into one loan which means only one payment to organise. But the advantages of having only one loan don’t stop there. Had you thought that by consolidating your debt, you may be able to pay off your exisiting credit that incurs comparatively high interest charges into one where you pay a lower interest rate? You may also decide to pay this new loan off over a longer period, which means that your monthly repayment will be lower than with your existing credit agreements. You must remember however, that this may mean that you end up paying more interest over the longer term than at present, but for now at least, it could make it easier to meet your repayments each month.
What? No More Telephone Calls And Letters?
If you have lots of creditors chasing you for their repayments, a debt consolidation loan could solve these temporary problems for you. By taking out a debt consolidation loan, you can use the finance to pay off the existing creditors and earn yourself some breathing space. No more harrassing calls, chasing their money!
Many people opt to organise a debt consolidation loan by releasing some of the equity in their home. Effectively, they are taking out a secured loan which as is suggested by the name, in the event of a default, the lender could enforce the repossession of the property in order to get hold of their money. You should always think hard about whether you could afford the repayments but in real terms, isn’t this what you wanted the debt consolidation loan for in the first place?
By taking out a debt consolidation loan, you could enable the lender to secure the new loan against the value of your property, and by so doing, the loan may attract a lower interest rate than you may have done with an unsecured loan. This of course, only applies if you are a homeowner and have enough available equity in your home. For tenants, there may be different options where you could still have a debt consolidation loan but by taking out an unsecured loan instead.
Debt consolidation loans are relatively easy to apply for these days. There are also many lenders and finance brokers in the UK that offer this type of facility. You could make an online enquiry in seconds and potentially have an offer within minutes. Of course, you will still need to complete and sign a credit agreement and your chosen lender may require proof of ownership of your property, proof of citizenship etc and they may also need to request an independent valuation so the whole application process may still typically take between 4-8 weeks.
Always make sure that you read and understand the terms however, and make sure that your new loan is as affordable as you need.
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