Personal loans can be very handy in a variety of different situations. Sometimes life can throw you a financial curve-ball, and you might need some emergency funds to plug the gap - other times, you may just need to pay for a big-ticket purchase up front.
Whatever your reason for needing a loan, you’re probably interested in knowing one thing - how long will it take to get it?
The answer can vary, and there are a few factors at play - but fear not. We’re about to walk through all of the different options available, and explain just how long it might take to get your loan approved!
How long does it take to get a loan?
Ah - the key question!
The first thing to get your head around is selecting your lender - basically, whoever is providing you with the money.
There are a few different types of lender, each with their own quirks, but they generally fall into these buckets - banks, credit unions, and online lenders.
The time it takes to receive your loan will vary quite a bit between them, as each of them will have different processes - some will ask you to complete longer application forms, some will take longer to review your details, and some will take longer to send the money. Read on to find out more!
So what are the differences between these lenders?
Let’s take a look at the different types of lenders in the market, and what you might expect when applying for a loan with them.
Typically, high-street banks don’t have the best reputation for prompt customer service. However, if you’re already banking with one of them, receiving a loan can be surprisingly quick - probably because they’ll be charging you interest! In all seriousness, it’s because they’re already familiar with your financial and personal details - as a result, your loan could be approved in as little as 30 minutes, and usually within 1 business day. Speedy, right?
If you’re a new customer to the bank, however, security checks can begin eating up time. The bank will need to verify your personal details and check your credit history - which is basically your track record of paying back money that you’ve previously borrowed!
These security checks mean you might be waiting 2-5 business days for your loan to be approved and funded.
Banks may not always offer the most competitive interest rates either, which is worth bearing in mind when you’re shopping around.
You can think of Credit Unions as non-profit alternatives to traditional banks. They’re a bit like member-owned, community savings pots. Members of the same community pool their money together, and this money can then fund future loans for these same members!
Credit Unions offer similar lending services to banks, but as they’re usually member-owned, you might expect better customer service, and even lower interest rates. Happy days!
In terms of the loan application itself, it’s very similar to using a bank - however, the process can take significantly longer with a credit union.
Your application may take anywhere between 1-5 days to be approved, and you could wait for up to 2 weeks for the money to hit your bank account. So although there are some perks to using credit union lenders (e.g. lower interest rates) just be sure that you’re not in too much of a hurry.
Online lenders (like Koyo and EverydayLoans) are a slightly different kettle of fish. These lenders specialise in personal loans, and position themselves as being faster than bigger financial institutions. It’s their bread and butter.
Within the world of online lenders, you may also come across ‘peer to peer’ lenders (often shortened to P2P) - which include companies like Zopa. They’re very similar to other online lenders, except your loan will actually be borrowed from another person! In an ideal world, borrowers (who need a loan) are matched with individual investors (who supply the loan money) - the borrowers get their loan, and the investors profit from the interest they charge on repayments.
You might actually find lower interest rates with these P2P lenders, but their eligibility criteria can be pretty strict - mainly because these investors want to make sure that their money is repaid on time!
When it comes to applying with online lenders, things tend to be a bit slicker - they aim to deliver a speedy experience, with instant decisions and quick funding. Many online lenders will approve and fund loans on the same day, and most won’t take longer than 1 business day to complete the process. No messing around!
What’s important to watch out for when applying?
- When you’re comparing loans between lenders, make sure you’re looking at the APR (Annual Percentage Rate) as opposed to just the interest rate. The interest rate is effectively just the cost of borrowing the money, and usually a percentage of the total loan amount. However, lenders can charge additional fees that won’t be reflected in the interest rate. For instance, ‘arrangement fees’, which lenders include to cover their admin costs (and charge as much money as possible in the process - convenient!) Any of these additional costs will be reflected in the APR, meaning it’s a much fairer comparison, and a better summary of what you’ll actually be repaying!
- While we’re on the subject - lenders will often advertise a ‘representative APR’ - and usually, this is a pretty attractive number! However, the lender only needs to offer this representative APR to 51% of applicants - meaning if you fall into the other 49%, you could be in for a nasty surprise. If your credit history isn’t great, then you might be offered a rate that is significantly higher than the representative APR - so just keep this in mind when submitting an application.
Make sure you repay on time!
Although this may be stating the obvious, it’s important to remember - repaying your loans on time is crucial! If you fail to repay on time, you could start to pay late fees and penalties, and it’s just always best to avoid these headaches. Make sure you’re always confident and comfortable with the loan agreement - the amount, the timelines, repayment schedule, etc.
If, for whatever reason, you’re struggling to repay your loan on time - don’t bury your head in the sand! It’s always best to reach out to your lender as early as possible, and let them know the situation. Lenders deal with this scenario all the time, and they’re normally very understanding. You might even be given an extension, which could be a massive help, so just make sure you’re communicating if you’re falling behind on repayments!
Top tips for a speedy & successful loan application
1. Be organised - make sure you’ve got your paperwork in order! Most lenders will require similar information, so it helps to get everything together ahead of time. Usually, you’ll be asked for:
- Your personal details (e.g. name, current address)
- Your bank details
- Your address history (covering the last 3 years)
- Details about your income/earnings and outgoings
- Employment information
2. Check your credit score - unsurprisingly, lenders will need to check your credit score before making a decision. Your credit score is basically a number that shows how good you’ve been at paying back money that you’ve previously borrowed. Simple!
You won’t need to know your exact credit score before applying for a loan, but it can be helpful to check beforehand, as you might even find some opportunities to improve it. This is never a bad thing, as lenders may offer you lower interest rates if your credit score is healthy! You can check your credit score with companies like Experian.
3. Use eligibility calculators - many lenders will offer you the chance to use an eligibility calculator before submitting a full loan application. They’ll ask for some personal information (like your name, occupation, income, etc) and then let you know how likely you are to be approved for a loan.
Sites like CompareTheMarket also offer eligibility calculators, and these are checked against a huge list of different lenders, which can save you a fair bit of time!
Using a calculator before applying can give you more confidence in following through with an application, and more importantly, won’t negatively impact your credit score. Everyone’s a winner!
So - what’s the fastest way to get a loan?
We’d never recommend rushing into a loan agreement - always try to take your time, and thoroughly compare a few different options before applying!
However, if time is of the essence, your best options are likely applying for a loan with your current bank (since they’re familiar with your financial record) or applying with an online lender (as they pride themselves on speedy applications).