Loan eligibility explained - Everything you need to know about getting accepted for loans

Loan eligibility

Applying for a loan doesn’t have to be a difficult process, but how do you know if you’re eligible to apply for one?

In our loan eligibility guide, we take you through everything you need to know about personal loan eligibility, what to do if you have bad credit and how to deal with an unsuccessful loan application.

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What does loan eligibility mean?

Loan eligibility is dependent on numerous factors, including:

  • Your current credit score
  • How much money you want to borrow
  • The amount of money you can afford to repay each month

Essentially, loan eligibility determines how likely you are to be given a loan based mainly on the above factors. 

How do I know if I'm eligible for a loan?

Before submitting a loan application, it’s a good idea to do as much research as possible in order to see if you think you’ll be accepted for a loan and to compare deals online to get an idea of which one would be best suited to you and your borrowing needs.

While there’s no way of guaranteeing whether you’ll be eligible or not, you need to have a rough idea of your eligibility otherwise you could face not being accepted for future loans as a credit check is performed on you whenever you apply for a loan and if you’re not accepted, this will go on your credit file.

You might like: Types of loans explained

What do I need to be eligible for a loan?

When applying for a loan, you will be subjected to a loan eligibility check and the only real way to know if you’ll be eligible for a loan is to simply apply for one.

However, it’s important to remember that an application for any type of loan will leave a “footprint” on your credit file, which means if your application is unsuccessful, other lenders will be able to see the mark on your credit file, which could mean you might struggle to get other types of finance in the future and could bring your credit score down.

Lenders will take you through a loan eligibility check which will look at things like your personal details, such as whether you’re over 18-years-old and you are a UK resident.

Your income and credit history will likely also be checked, so when applying for a loan, it’s a good idea to have this information to hand.

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Types of loans

There are many types of loans available, and they usually fall into the categories of unsecured, secured, fixed-rate and variable-rate loans; check out some of the most common types of loans below.

  • Personal loans
  • Short term loans
  • Car loan
  • Joint loan
  • Payday loan

Learn more in our guide on the different types of loans in the UK.

How to get a loan

There are several steps that you will need to take in order to get a loan, find a brief rundown of them below.

  • Consider whether you really need a loan, or if there are other means of finance that might be better suited to you.
  • If you’ve decided that a loan is the right thing for you, you will then need to think about the type of loan that you need.
  • Once you’ve come to a decision on the best type of loan for you, you should then try and check your own credit score to see if you would even be eligible for one. You can also use loan eligibility calculators online, like this on MoneySavingExpert.
  • You will then need to do your research and compare different loan providers in order to see which one is best suited to you and your financial needs.

When applying for a loan, you will need to supply the lender with the following information so that they can check your eligibility:

  • Personal details such as name, address and age.
  • Your previous addresses over the last three years or so.
  • Your bank details.
  • Where you work, your job title and how much money you earn.

Who is eligible for a student loan in the UK?

Your eligibility for a student loan in the UK is dependent on many factors, including (but not limited to); your age, your nationality or residency status, the university or college that you’ve applied to, the course you plan on taking and whether you’ve studied a higher level education course before.

What is the best loan eligibility checker to use?

There are so many loan eligibility checkers that you can use to check whether you’re likely to be accepted for a loan or not. In the UK, some of the best loan eligibility checkers are:

  • MoneySuperMarket
  • Totally Money
  • MoneySavingExpert
  • Experian
  • Compare the Market

Do I need a good credit score for a loan?

While the exact credit score that you need to be successful with a loan application varies depending on the lender, it’s safe to say that the better your credit score, the more likely you are to be accepted for a loan.

If you have a bad credit score, lenders will deem you as more at risk and therefore may be reluctant to offer you a loan, or they may offer you one, but the interest rates and conditions might not be quite as good as if you have a good credit score.

Read more: What credit score is needed for a personal loan?

How to improve my loan eligibility

One of the most important factors in improving your eligibility for a loan is improving your credit score. There are several ways that you can do this.

Clearing any outstanding debts you have is one of the best ways to increase your chances of being eligible for a loan as it shows that you’re able to pay back the money that you owe. If possible, try and focus on paying back as many of your outstanding loans and debts as possible before you apply for another loan. While this is definitely much easier said than done, it will likely drastically increase your chances of being accepted for another loan as it proves your willingness and ability to pay back the money you owe.

Another way to improve your loan eligibility is to try and reduce your borrowing expectations if possible. If your current credit score and financial situation isn’t ideal, then you may struggle to borrow a large amount. However, if you try and reduce your borrowing expectations and borrow less money by budgeting in other ways, you’re likely to increase your chances of being accepted for a loan.

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