Get a loan by applying tactically

Even a black mark or two can pretty much wipe out your chances of getting a top loan. Here's what to do.

It seems that only quite a small proportion of people get accepted for a personal loan, and half that number aren't even offered the advertised rate, but something higher. The irony is that if you apply several times for credit in a short period, other lenders are even more likely to reject you. That's why you don't want to apply too often.

If you have bad marks, you can forget about the top loans, but perhaps you can still get a relatively cheap loan by being tactical.

Use your existing relationships

Firstly, if you have a long record with one bank or lender and, with it at least, you have a good credit history, this could be your first port of call. I have read many comments from readers over the years of great success with this technique. Give the bank a call, say you're shopping around for a loan and ask what deals it could offer you.

Apply for loans tactically

If you have a less than perfect record, I think you are very unlikely to be accepted for the cheapest loans, which are currently around 7% APR. I think you might increase your chances by applying for a loan up to around 10% APR, such as the AA's loan, advertised at 9.9% APR, of which half of applicants should get that rate. The idea here is that some lenders offering higher rates might have looser acceptance criteria.

You could try out the theory that the taxpayer-owned banks – Bank of Scotland, Halifax, Lloyds and Royal Bank of Scotland – will have more relaxed criteria, as they're being encouraged by the government to lend more. There are absolutely no guarantees that they will live up to this responsibility (figures show they have a patchy record at best for their targets for lending to businesses, for example), but perhaps it will boost your chances.

Be persistent and sell yourself

If you are rejected, don't give up. Write a short, polite letter to the lender saying why you think it should change its mind and accept you. Give the lender as much information as you can, but don't lie or exaggerate, give an honest assessment, and you will be taken more seriously. Many of our readers have had great results from doing this over the years.

Ensure your English is excellent by getting someone to check over it. (If you're too embarrassed to show the letter to a friend, you need to think about what that pride can mean for your finances. Too embarrassed to admit the truth that you've been overspending or fallen into difficulties means you cannot say, for example, that “Tonight I'd rather save money, so could we just stay in and play a board game instead?” Your friends will respect you if you show that the new you is disciplined and in control, even against peer pressure.)

Rejected again? Contain your desperation

After trying all the above, you might be rejected again anyway. If you've had more than a couple of missed payments in the past three years, or two in the past six months, I would expect that you will be rejected or offered a worse deal.

That's just my opinion based on instinct and the hints I've picked up from lenders over the years; we can't be sure exactly where the boundary lies, because lenders are so secretive about their criteria, and they are all different.

At this point you may then be tempted to go for a loan at much higher rates. Perhaps a lender will reject you at the advertised rate, but will offer you a “lifeline” at a much higher one.

Recent question on this topic

• saxony69 asks:

  Good credit rating but turned down for a loan.

  • 
    SoftwareBear answered "He possibly has a level of debt that they feel he can handle on the salary he has and any more..."
  • 
    MikeGG1 answered "With debt on 2 Credit cards and a large overdraft, it is unlikely that his credit rating is..."
  • Read more answers

Don't succumb to desperation. I would think very carefully indeed before taking a loan over, say, 12%. This rate is already going to cost you a lot of money. Higher rates mean you're less secure and more prone to further problems when (not “if”) you have emergencies and unforeseen expenses, for example.

The more debt interest you pay, the poorer you will be and the less stuff you will be able to own, not just during the loan, but for the rest of your life. Go for a rate that's too high and you may find it is not a way out but a way further in to a debt nightmare.

At this stage, when you're simply unable to get credit below 12%, the chances are very good indeed that you have a better option somewhere. It's just not obvious to you, a non-debt expert. Since your best option is always based on your precise circumstances, you should contact a free money-management charity that will help you to do so.

If you think you are desperate for cash, you are actually desperate for customised advice. National Debtline is great, or visit Citizen's Advice or the Consumer Credit Counselling Service. There are others you can try too, but ensure they're money charities, not companies.

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