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How to apply for a loan: what to consider and the alternatives  

6 mins read
by Lisa-Marie Voneshen
Last updated Wednesday, May 22, 2024

A loan can be helpful if you have costs to cover or want to spread larger expenses over many years, but there’s a lot to take in beforehand. We explore what you should consider before applying.

While many are often keen to avoid getting a loan, they can be useful to cover costs or spread expenses over many years or for large purchases – if you’re confident you can repay it. 

There are many things to consider before signing on the dotted line. We’ll explore how to determine if a loan is right for you, the alternatives, and how to apply for one. 


  • You should make sure that getting a loan is right for you before applying.

  • There is a lot to consider, including how much you can afford to borrow.

  • Unbiased can connect you with a qualified financial adviser who can help you reach your future financial goals. 

Is a loan right for me? 

There’s much to consider before getting a loan, as it impacts your credit score and your ability to borrow in the future. 

So, for example, if you plan to buy a home in the next six months, you should avoid anything that could impact your credit score. 

You should always shop around for the best loan for the best terms and lowest interest possible.  

Below are some major considerations you should factor in before you get a loan.  

  • How much can I afford to borrow? You must understand how much you can afford to borrow by looking at your monthly income and spending. You’ll need to be confident you can make your monthly repayments on time and in full. If you miss any payments or are late paying, this can affect your credit score and how much you can borrow in the future. 

  • Am I comfortable with my credit score being temporarily reduced? When you apply for credit, there’s a ‘hard’ check, lowering your score. An eligibility checker can show how much you can borrow, but ensure it uses a ‘soft’ search so your score is unaffected.  

  • What type of loan do I want to apply for? Various loans are available, so you should choose one that is right for you. Do you want a fixed or variable interest rate or a secured or unsecured loan? A secured loan allows you to borrow money and use your home as security, so you could lose it if you fall behind on repayments, but an unsecured loan doesn’t require this.  

  • Should I get a loan or a credit card? You should think about whether a loan or credit card is better for your needs, as the repayment schedules can vary. Some top credit cards may offer an interest-free period, so you pay no interest for a set time.  

Can I apply for a loan if I have a bad credit history? 

You can apply for a loan if you have a bad credit history, but you should use an eligibility checker first to see how much you can borrow without affecting your credit score.  

When you apply for credit, your score will be affected, and you’ll likely be offered a smaller loan at a higher rate than applicants with higher credit scores. This is due to your perceived risk to the lender.  

How can I improve my chances of getting a loan before applying? 

You can improve your chances of getting a loan by making sure your credit score is good. 

If you have a bad credit history, there are many ways to improve your credit score.  

For example, you could make sure you’re registered on the electoral roll, pay your bills on time, and check that your credit report doesn’t have any errors that could impact your application. 

If there are any errors, you should raise this with the company and get it fixed as soon as possible.  

The better your credit score, the more likely you will access lower rates when getting a loan. 

What are the alternatives to a loan? 

There are a few alternatives to a loan, which we’ll outline below: 

  • Consider an overdraft: Your bank may offer a 0% overdraft for a set amount or a limited amount of time, which could be a short-term solution. It’s worth checking before going overdrawn to see if you can get an authorised one and avoid any fees. 

  • Consider a credit card: Some credit cards offer a 0% interest-free period to spread the cost of a big purchase over a set period. You should pay your bill in full and on time every month. 

  • Dip into your emergency savings: If you have any savings that don’t immediately need to be used, you could consider using some of these funds. You could also plan to top up your savings when you can.  

  • Ask family or friends if they can help: While this may be awkward, you could ask any family and friends if they can help and have a clear plan for repaying them.  

How do I apply for a loan, and what information is needed? 

You’ll usually be able to apply for a loan online with the lender directly, or you may be able to do this at the bank or building society if you would prefer. 

If you plan to apply in a branch, make sure you have all your documents with you. 

When you apply for a loan, the lender will ask for your personal details, including your name, contact information, current and previous addresses and date of birth, as well as your marital status. 

You’ll also be asked if you’re employed, who your employer is, what your role is, and what your household income, spending, bills, and debt are. 

You must provide accurate information, so the lender fully understands your financial situation.  

The lender will then look at your application and information they may already hold, as well as your credit report, and compare it to their criteria. 

If your application is accepted, you’ll receive the term and interest rate of the loan.  

If your loan application is rejected, you could try another lender. 

You should wait a while before applying again and check your eligibility to reduce the chances of rejection and damaging your credit score. 

How long until I receive my loan? 

When you receive your loan depends on many factors, including: 

  • The type of loan

  • The type of lender 

  • If you’re an existing customer 

If you’re getting a loan from a bank or building society, you could get your loan the same day if you’re an existing customer or up to five working days if you’re a new one.  

With online direct lenders, you’ll usually receive your loan the same day or the working day after your application is approved. 

If you apply for a guarantor loan or use a credit union, it could take a few weeks to receive your loan, although the former can be received faster than this. 

Does my loan affect my credit score? 

Getting a loan will negatively impact your credit score in the short term as long as you pay back what you owe. 

Making payments on time can help your credit score rise again and improve your long-term credit history. 

If you fail to make payments on time or get rejected for a loan, this can impact your credit score.  

Need help with your finances? 

Unbiased can quickly connect you with a qualified financial adviser who can help you get the most out of your money and save towards your future goals.  

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Lisa-Marie Voneshen
Lisa-Marie Voneshen is a Senior Content Writer at Unbiased. She is an award-winning journalist with nearly a decade of experience writing and editing content across various areas, including personal finance and investing.