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Financial Status

Applications for personal loans are constantly on the increase; customers are looking to take advantage of the loans market, which is currently flooded with personal loans companies, all competing to give the customer the very best, and thus the most appealing loans deal. The loans market is also branching out to offer far more specialised loans; these can range from student loans, to car finance loans and even debt consolidation loans. However, no matter what type of loan is on offer, and from what company, it is common practice for the loan application to be advertised as ‘subject to status’. This is because for the loans company, it is important to estimate whether the customer or borrower is in a suitable financial situation to eventual pay back the full loan amount in addition to the interest rates and any administration fees. Basically they are taking a risk in lending this money, which in reality constitutes relatively large amounts for each customer, and will only be secure in lending this money to customers who are the most likely to repay it.

Financial status is dependent on many different factors, but the problem faced by many potential borrowers is that they find it difficult to prove their financial status. The majority of loans companies nowadays have computer systems that are able to comprehensively check the credit history of a customer. The result of this credit check will take into account any previous debt problems, or perhaps major outstanding credit card balances which could impact the customers credit rating more negatively. Aside from this credit check, it is also common practice for loans companies to request proof of earnings and employment. Usually this can take the form of a pay slip, or perhaps an official correspondence with the Inland Revenue. However, for self-employed people, it is sometimes necessary for a professional accountant to intervene and produce a report of the customer’s earnings and incomings. The most important factor to consider is that this check of earnings and financial assets applies only to ‘free’ assets, or in other words to money that is directly accessible by the potential borrower, so not tied up in stocks and shares or property. Some professions will also receive a better credit rating, especially those who have been based in a long term position, as opposed to a customer with a temporary working contract.

Despite all of the restrictions placed on loans applications, with regards to financial status, the actual conditions of financial status differ greatly amongst the various different loans companies on the market. Some loans are available only to home owners, and are otherwise known as secured loans, with the property acting as collateral for the loan. With this type of loan, the restrictions on financial status are obviously very strict. Some loans are however available to non-home owners. Perhaps the most recent advancement on the loans market, is the introduction of specialised ‘bad credit’ loans. This means that customers who would otherwise be rejected for loans applications, perhaps due to a bad credit history or unstable income, are now in a position to borrow from loans companies. Of course, the terms and conditions of the loans may be slightly less favourable, with higher interest rates or lower loan amounts. Nonetheless, the position of potential borrowers with poorer credit ratings has greatly improved, and more importantly, successful loans applications can often be used for loan consolidation purposes and thus mean that the customer is able to improve their financial status in the long term.