How to Raise Loans When Times Are Tough

After ten years of low cost and easily available credit, obtaining a loan or credit card during the last year has become much tougher.

Yet for those who are prepared to look a bit harder, loans and credit cards are still up for grabs. The market for credit is still buoyant.

Personal loans seem to be faring better at least than the mortgage market. There has been a fall of 16.7 per cent in the number of un-secured loans given out in the year from July to July but this is much less than the drop in mortgages. A massive £2bn worth of loan finance is still being lent by the banks every month.

Quite simply, consumers need to ask themselves if a loan is really necessary. Saving up for a new car or some home improvement like a new kitchen may take several months but it would save thousands of pounds in interest payments.

If a loan really is needed, then you must examine your credit rating. Only those people with the highest credit rating will be eligible for the cheapest rates. You can obtain a paper copy of your credit file from companies such as Equifax and Experian for as little as £2.

There are also a number of things you can do to make sure that your credit file looks as good as possible; making sure you're on the electoral roll for example. Also if you had credit problems in the past but there was a good reason for this, you can put a short note (up to 200 words) on your file to explain why. Lenders might take this into account.

You could also ensure that your credit file doesn't have any ties to people with whom you are no longer associated, especially if they have a bad credit record themselves because this could reflect on you. If you have ever had a joint bank account or mortgage with anyone, they will be directly linked to your file. You can have this link removed if you write to the credit agency.

Likewise you can make sure that all the information on your file is correct. After all, a black mark against you may be a genuine mistake.

After all this checking, you will have a rough idea of what your credit score is and you can begin your search for a loan. The internet is a good place to start and comparison websites like moneysupermarket.com and moneyfact.co.uk are useful.

If you only need a small loan (up to £2,000), it is well worth looking at Credit Union. These financial co-operatives are owned and run by their members. Contact www.abcul.org.uk to find out if there is one in your local area. Credit unions charge, on average, just over 1 per cent for their loans per month. None charge more than 2 per cent.

If you want a very large loan, you will probably need a very valuable asset to secure against it. Credit & Mercantile offers loans of £200,000 to £15million. They are not interested in credit history, only in the assets which a customer has to offer.

In general, credit cards are to be avoided for long term borrowing since interest rates are very high, often into the teens.

It is worth considering Zero balance transfers however, and there are still a number of credit card companies who are offering these deals which could reduce your debt. Capital One, Halifax and Virgin Money all offer zero per cent for 15 months on balances transferred from another card. Remember, however, that they all charge a handling fee for this privilege.

If you want the longest zero per cent card interest rates for purchases First Direct and Capital One offer the best deals at 12 and 14 months respectively.

Look out too, for cards which give permanently low interest rates. Barclaycard Simplicity, for instance, has a rate of only 6.8 per cent.

For credit card applications, like for loans, you still need to ensure that your credit record is as good as it can be. Every application you make is recorded on your file, although rejections aren't recorded.

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