Applying for a personal loan when an existing loan search comes up?

CivilGal

Hi, I recently put in a credit application for a personal loan from the credit union I save with. I did this as I thought it would be a quick process instead of actually shopping around as their fixed rate is 6%. 

I think they’re going to reject my application due to the time I’ve been in my current job role (6 months), despite the fact I have decent credit. They’ve performed a hard search - this is frustrating as they’ve not even “considered” my application yet and have asked me to provide proof of income and employment. I’m waiting to get information from HR at my work to send onto them but after speaking to a family member who was in a similar situation with the same credit union, we think they are unlikely to approve me. 

Meanwhile, I’ve been looking elsewhere and it seems likely two other lenders, including another credit union, will approve me for the same amount with similar interest rates. I know a friend got a large-ish loan from the other credit union recommended to me despite changing jobs and being on a temporary contact and making a lowish income, so they’re definitely less “strict” in that sense. I had a peak at non-credit-union loan application and they seem to be more concerned with your overall earnings and outgoings as opposed to finite details. 

I’m just conscious about putting in an application, particularly with the other credit union, in the event they see the other hard search. Is this likely to impact things? It’s the only hard search on my file at present. 

Does anyone have any advice/guidance on next steps? Thanks. 

CliveOfIndia

If you've only got one search on your file, then one more won't hurt.  It's when you get several in a short space of time that lenders start to get jittery.

CivilGal said:

I know a friend got a large-ish loan from the other credit union recommended to me despite changing jobs and being on a temporary contact and making a lowish income, so they’re definitely less “strict” in that sense.

I'm not meaning to sound dismissive, but the outcome for your friend has no bearing whatsoever on the likelihood of you being accepted.  Each application will be judged on its own merits, and will take into account many factors about the applicant.

In general, the best advice is to do some eligibility checks (ideally on the lender's own website, rather than a third-party aggregator site).  Whilst by no means a guarantee, they will at least give you an indication of your likelihood of being accepted.

Also, bear in mind that any advertised APR has to be offered to only 51% of successful applicants.  The actual terms offered to you will be calculated based upon your individual circumstances and credit history.  So if you do get accepted, make sure you read the small print in order to understand exactly what rate you're being offered, before you decide whether to accept the offer.

CivilGal

CliveOfIndia said:

If you've only got one search on your file, then one more won't hurt.  It's when you get several in a short space of time that lenders start to get jittery.

CivilGal said:

I know a friend got a large-ish loan from the other credit union recommended to me despite changing jobs and being on a temporary contact and making a lowish income, so they’re definitely less “strict” in that sense.

I'm not meaning to sound dismissive, but the outcome for your friend has no bearing whatsoever on the likelihood of you being accepted.  Each application will be judged on its own merits, and will take into account many factors about the applicant.

In general, the best advice is to do some eligibility checks (ideally on the lender's own website, rather than a third-party aggregator site).  Whilst by no means a guarantee, they will at least give you an indication of your likelihood of being accepted.

Also, bear in mind that any advertised APR has to be offered to only 51% of successful applicants.  The actual terms offered to you will be calculated based upon your individual circumstances and credit history.  So if you do get accepted, make sure you read the small print in order to understand exactly what rate you're being offered, before you decide whether to accept the offer.

Thank you so much. That makes a lot of sense. I appreciate this and I get where you’re coming from. 

So even though my search will show up from a lender that I’ve applied for a loan this month, that won’t really impact if I try elsewhere? It is the only search on my file right now, apart from soft searches. 

The places I’ve checked I’ve done “soft searches” on. The credit unions - both the one I’m in and the one I’m thinking of applying to have fixed rates for their members. The other place I know will depend on my own personal circumstances and what they’ve initially quoted me is higher than on their website. 

As for the credit union and my friend being accepted, I meant it more in terms of the way the credit unions check things and their compliance. It seems the credit union I am at has a significantly higher threshold of compliance than the other one. I know credit unions in general do more checks on your income, outgoings, etc as they are generally cheaper than other lenders but mine is weirdly anal about employment. 

Might be better for me to explain a bit more as I tried to keep my post vague -

My current credit union where I save is unlikely to offer me a loan (although I could be wrong - it depends on what they say). They’re a very very small credit union and not keen on lending to people who have been in a job for less than a year. I know this because a family member was rejected for a loan from them last year. The reason was because they’ve been in employment for less than a year. The adviser basically said to them that everything else was fine but they needed more proof of consistent income. I also previously discussed with their advisors a few years ago about getting a loan with them - at the time, I was on a 12 month FTC and the advisor basically said they wouldn’t lend to me due to this fact. I ended up getting a loan through my bank who asked virtually 0 questions - it was quite expensive (I think 16.5%), but I paid it off in three years with no missed payments or holidays! However, I forgot about these things and I naively applied to them earlier this month as I’ve been a saving customer for years, have a consistent work history and earn a decent salary. I also have low outgoings. However, they came back quite aggressively for various proofs of employment and didn’t ask for evidence of anything else. This happened to my family member also, so, I figured that’s a way to weed me out. 

My friend is with the credit union I am looking to join do fix rates. The friend earns significantly less than me, have less secure work and has higher outgoings. When she applied to this credit union, she informed them of her work situation, supplied them with x amount of payslips but they didn’t ask for any of the other malarkey. 

CliveOfIndia

I'll try and give you some answers as best I can.

CivilGal said:

So even though my search will show up from a lender that I’ve applied for a loan this month, that won’t really impact if I try elsewhere? It is the only search on my file right now, apart from soft searches.

It's a bit of a vague rule of thumb, but one previous recent search won't hurt.  3 or 4 or 5 will make lenders nervous.  Although they can't see the outcome of a search, the fact that you've made a lot of applications implies that you keep getting rejected.

CivilGal said:

The other place I know will depend on my own personal circumstances and what they’ve initially quoted me is higher than on their website.

That implies that they've judged you as a "higher risk" than other applicants - again, no judgement from me as to your circumstances, it's just how their computer systems have assessed you.

CivilGal said:

As for the credit union and my friend being accepted, I meant it more in terms of the way the credit unions check things and their compliance. It seems the credit union I am at has a significantly higher threshold of compliance than the other one. I know credit unions in general do more checks on your income, outgoings, etc as they are generally cheaper than other lenders but mine is weirdly anal about employment. 

Yes, different lenders have very different acceptance criteria.  Coutts, for instance, probably want to attract different customers than the payday loan sharks.

CivilGal said:

They’re a very very small credit union and not keen on lending to people who have been in a job for less than a year........I was on a 12 month FTC and the advisor basically said they wouldn’t lend to me due to this fact.

Not uncommon - put the boot on the other foot, would you lend to someone who is on a probationary period at work, or who's employment is going to be coming to and end before they've paid back what they owe you?

CivilGal said:

My friend is with the credit union I am looking to join do fix rates. The friend earns significantly less than me, have less secure work and has higher outgoings. When she applied to this credit union, she informed them of her work situation, supplied them with x amount of payslips but they didn’t ask for any of the other malarkey. 

From my limited understanding of credit unions, they tend to place more store on the amount you've saved with them than your credit circumstances (as a more "traditional" lender would).

I'm not sure if this helps at all?  I guess it comes back to the age-old question - what do you want the loan for, and is it absolutely essential?  If you're finding it hard to get accepted for a loan at a decent rate, is it time to take a step back and say to yourself "Do I actually need this, or is it something that can wait until I've saved up"?

CivilGal

That’s all super helpful CliveOfIndia, thank you so much! I mean, I doubt it but this all could be for nout and my current CU could accept me. 🤣 The loan is necessary but not alarmingly urgent, so if I’m knocked back again then I’ll figure something complicated but not utterly unhinged out 

CivilGal

I forgot to update this but I got the loan fine in the end from the second CU, just incase someone else was in a similar situation 😀