Personal loans in the UK – What you should never do

Little white lies are harmless, right? Not when they are listed on your loan application. Lies on your loan application are not harmless and can be detrimental to your chances of obtaining credit. Different people have different reasons for lying on their loan applications. Some people want to hide a bad credit history, while others do not want to reveal personal information. Still, regardless of the reasons, being a loan liar is not a good practice. It can hurt you and undermine your chances of getting a loan. Unfortunately, loan lying is relatively common in Britain.

Who are the loan liars?

Loan liars come from all walks of life. Men between the ages of 26 and 40 make up two-thirds of those who lie on their loan applications for secured loans, insurance, and credit cards. Of these men, approximately 64 percent of them lie to hide a poor credit history. By contrast, 77 percent of women lie on their loan applications to hide a poor credit history. Of this number, 17 percent use an alias. Of all the loan liars, 10 percent admit to using false documents to support their false claims on loan applications. Also, 9 percent of men and 7 percent of women lie about their status of employment or salary.

Why should you not be a loan liar

Of course, the number one reason to NOT be a loan liar is that it is illegal. Some people don’t care one whit, however, about legalities. That is OK, though, because there are other equally compelling reasons. Consider why you want to get a loan in the first place: to get approved for credit or to get approved for a higher amount of credit. You could be digging yourself into a deeper hole. Suppose you do get that credit or higher limit, now what? How will you make your payments, and what do you have at stake that you could lose? If you lied to obtain a mortgage, you could lose your home. Think about it and consider the ramifications before telling that tale.

What impact do loan liars have on overall debt?

Loan liars play a large part in incurring overall debt, meaning loans that are not repaid. Massive overall debt contributes to higher interest rates for everyone. If you are a part of the problem by contributing to the overall debt, you are part of the reason that interest rates increase. Do you want to be a part of the problem or a part of the solution? It is up to you.

How do you get caught?

More and more companies are catching loan liars before they can do any real damage. How do they do it? Lenders are working together and sharing information, and this is making it much easier to catch loan liars. They are using loan data sharing services that capture the loan liars before they are accepted.

The bottom line, it is just not a good idea to lie on loan. If you do get away with it, you will likely not be able to afford it. If you don’t get away with it, you could face legal problems. It is a no-win situation. Play it safe and tell the truth.

Basic principles of a loan

Understanding the basic principles behind a loan can save new borrowers a lot of stress and make the borrowing process more straightforward. This article will explore some of those loan basics.

A consumer loan is when a financial institution lends you money with the promise (from you) that you will repay the money. Most loan payments include both principal and interest.

The principle is the amount of money that you borrowed. Interest is the price paid for borrowing money; this is usually expressed as a percentage.

In an interest-only loan, the interest of the loan is paid off before the principal. It is essential to understand this because many mortgages are interest-only loans. Using this kind of loan allows the lender to make a faster profit on the loan, and in return, it also allows the lender to offer you lower interest rates.

Borrowers should understand that during the first years of an interest-only mortgage, the entire monthly payment goes toward interest. Because of this, there will be no decrease in the amount of the principle that was borrowed. In some cases, the initial interest-only payments are lower than the principal payments. This allows the borrower, who expects to earn more profit over time, to obtain a larger loan.

Variable Rates versus Fixed-Interest Rates

Aside from interest-only loans, you may see offers for loans that are based on either variable rates or fixed rates. Credit cards generally use either the variable or fixed rates systems when calculating the interest.

Variable-rate loans are based on the prime lending rate, and then some additional interest percentage is added to cover profits for the lender. Whenever the Federal Reserve raises interest rates, your bank will increase your interest as well. If the prime lending rate is low, variable rate loans and credit cards can be incredibly competitive with fixed-rate loans.

Fixed-rate loans and credit cards offer you guaranteed interest rates that do not fluctuate. You will know what your payments are every month based on the fixed-rate percentage of the loan that you took out. This offers consumers more emotional security because they do not have to worry about their monthly bill increasing suddenly.

All borrowers should understand that variable rates are different than teaser rates. Teaser rates are temporary and last only for a limited time, usually three to six months. Once that period is over, the rate will go up, and so will your monthly bill.

One of the most important principles behind a loan is establishing a good credit history. The fastest way to get a low credit rating is not to pay your monthly bill or to be habitually late in paying your bill. These activities are usually reported to the three big credit reporting agencies, and this information will stay on your credit history record for years to come. If you must take a loan out, make sure that you can make the monthly payments on time.

If you have any questions about your loan or the interest that is being charged, ask the credit person to explain it to you in detail. They are happy to do this. As a general rule, try to keep your non-mortgage debt payments below 10-15% of your monthly take-home pay.