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Published 26 October 2023
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Personal Loan Eligibility: Am I Eligible for a Loan?

Before applying for a loan you’ll want to be clear about the criteria you need to meet. We explain what lenders consider, the checks they make and what you can do to prepare.

If you’re considering a loan, how do you know if you will meet the lender’s requirements? Understanding if you are eligible for a loan before applying can help to minimise the chances of your application being declined. 

Helpfully, many lenders allow you to check your eligibility for a loan without affecting your credit score.

Different factors, such as your credit history, any existing debts and your income will help a lender decide if you fit its criteria and whether to offer you a loan. 

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Am I eligible for a personal loan?

To get a personal loan, you typically need to be at least 18 years old and a UK resident with a UK bank account. Beyond this, your eligibility for a loan will usually depend on the criteria of individual lenders.

Lenders are required to check that you can afford to repay the loan. They can look at your income, regular expenses, spending habits and any existing debts, as well as your credit history, to work out whether to approve your loan application.

If you’ve repaid previous debt on time, haven’t experienced other significant financial difficulties and have a secure income, you’ll likely be eligible for a personal loan.

Some lenders will set minimum income requirements and may only offer loans to people with good credit scores. Other lenders cater to those with less-than-perfect credit histories, however borrowing with a poor credit score will typically be more expensive.

Depending on the lender, there may be other criteria too. For example, a high street bank might ask that you bank with it before it offers you a personal loan.

What you’re using the loan for can also make a difference, so you will usually be asked what you plan to do with the money. Lenders vary, but most won’t allow you to use a personal loan for business, investments, timeshares, buying property (including as a mortgage deposit), or gambling.

How can I check my loan eligibility?

Checking how likely your personal loan application is to succeed before you formally apply for a loan will be time well spent. It can make sure you only apply to the lenders that are most likely to accept you and it won’t affect your credit score.

Many lenders and comparison sites have a tool that allows you to check your eligibility to see how likely you are to get approved for a loan.

What is a loan eligibility checker?

An eligibility checker is a free tool offered by many direct lenders, to help you see if you qualify for a loan. Using it can minimise the chances of you applying for an unsuitable loan and getting your application rejected.

Many comparison sites and brokers also offer eligibility checkers that allow you to see your chances of approval from a range of lenders.

To see if you are eligible, you will need to provide information about you and your financial situation, and the lender may also run a soft credit check. This check won’t affect your credit score.

The lender will let you know their decision, and you can then choose to formally apply for the loan or walk away.

It will typically only take a few minutes to use the eligibility checker and see your chances of making a successful application.

How do I use a loan eligibility checker?

When you use a loan eligibility checker, you will usually need to provide some key details about you and your finances, including your:

  • name
  • address
  • date of birth
  • income
  • employment status

You will also need to say how much you want to borrow, the term you want to repay the loan over, and what you want to use the money for.

Once you fill in all the required information, the provider will run a soft credit check and tell you whether you qualify for a loan.

If you are eligible, you may see that you have a pre-approved loan offer. This simply means that, based on the information provided, the lender provisionally agrees to offer you a loan at a certain rate.

However, this isn’t a guarantee that you will get the loan. If you decide to proceed with your application, the lender will run a hard credit check (which will appear on your credit history) and make a final decision on whether to lend you the money.

What credit score do I need to get a loan?

Your credit score helps lenders determine your loan eligibility and the risk of lending to you. It helps lenders decide:

  • whether you’re eligible for a loan
  • how much you can borrow
  • the interest rate you’ll pay

Each lender has its own credit score requirements, but, the better your score, the more likely you are to be accepted for a loan and the lower the rate of interest you may receive. 

While a good credit score can improve your chances of approval, lenders will also consider other factors, such as your income, to help decide whether to offer you a loan.

By checking your credit history, lenders will want to get a picture of how you have managed your finances in the past and will look for specific information, including: 

You can check your credit report with the three credit scoring agencies Experian, Equifax and TransUnion. They must provide you with a free statutory report, by law, and you can request this through their partner websites.

» MORE: What credit score do I need for a loan?

What if I’m not eligible for a loan?

If you use an eligibility checker and it says you’re not eligible for a loan, you should try to think about why this is the case. Lenders can decline a loan application for many reasons, such as if you have recently been declined credit or have an outstanding county court judgment (CCJ). 

A lender may also turn down your application simply because it doesn’t think you could afford the repayments. 

If the checker indicates that you’re not eligible for a loan, don’t carry on and submit a formal application. You are unlikely to be accepted and it will leave a mark on your credit history.

Too many applications for credit over a short time can affect your credit score and leave lenders concerned that you are struggling financially.

» MORE: What to do if you can’t get a loan

How can I improve my loan eligibility?

A straightforward way to help make sure you’re eligible for a loan is to double-check the lender’s requirements before you apply. While there is no guarantee you will be accepted, if you tick the boxes for its basic requirements, you’ll be giving yourself the best chance of being accepted. 

If you don’t qualify for a loan from one lender, it may be that you need to consider a loan from a different provider that is more suitable for your circumstances. For example, you could consider other options such as a guarantor loan. This is when someone you know acts as a guarantor and promises to repay the loan if you’re unable to, which gives the lender added security.

It’s also worth checking your credit report to see if there are any areas for improvement. A better credit score could increase your chances of getting accepted for a loan.

There are several steps you can take to improve your credit score, though these can take time to show on your credit report. 

These include not applying for lots of loans over a short period, paying off other debts where you can, and paying bills in full and on time. Also, even small actions can make a difference, such as registering to vote.

» MORE: How to get a loan

Should I get a personal loan?

You may want to consider a personal loan if:

  • the repayments are affordable
  • you’re not borrowing more than you need
  • there aren’t other routes that might be more suitable or cost you less overall

But, before you take out a personal loan, ask yourself if it’s necessary. You’re committing to repaying a loan over several years, along with the interest that will accrue, and during that time your personal and financial circumstances may change.

You need to be certain that you’ll be able to pay the money back. You might also consider how you would meet the repayments if you lost your income. You might be able to take out income protection or other insurance to cover that possibility, but that would add to the cost of the loan.

If you’re already struggling to meet your existing financial obligations, such as a mortgage or rent, think twice about taking out a personal loan. Some lenders will ask you to make sure you’ve considered the rise in the cost of living and how that may put a strain on your finances.

Instead of a loan, you may want to consider asking for debt help if you’re in financial difficulties.

» MORE: Personal loan calculator

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