How to apply for a loan

Applying for a loan in the UK comes down to four routes: in person at a branch, by post, by phone, or online¹. Which of them is open to you depends on the lender and the product rather than on any rule of law, so the first practical step in any application is finding out which routes a particular provider accepts. Once the form is in, the lender runs its checks, and the cost of what it offers you is shown as an APR, which is the figure to use when comparing loans: generally, the lower the APR, the better the deal².

This page walks through each stage in the order it happens: the routes you can use, what secured and unsecured lending means for your application, the checks a lender must run, how the APR shows the cost, what to do if you are turned down, how to spot an illegal lender, and where to complain if something goes wrong.

Ways to apply for a loan: branch, online, phone or post

Personal loans can be applied for in person at a branch or by post, phone or online¹. The same four routes run through most of UK consumer finance, though which ones a provider offers varies product by product. Credit cards can be applied for online, by post, by phone, or at a bank or building society⁷. Current accounts can usually be opened online, using an app, over the phone or in person, depending on the account chosen⁸. Government-run schemes have their own routes: a Social Fund Budgeting Loan can be applied for online, by requesting a form from the Social Fund Budgeting loans service by phone, or by calling into a local Jobs and Benefits office⁹, and Pension Credit can be applied for online, by phone or by post¹⁰.

Some products are tied to one or two routes only. Student finance applications can be made online or by post, depending on the type of student finance you are eligible for¹¹. NS&I Income Bonds can be applied for online or by phone using a UK debit card, or by post with a personal cheque, banker's draft or building society branch cheque, and applications on behalf of a trust can only be made by post¹². Credit unions often work differently from banks: one credit union invites borrowers to complete a loan application form by visiting their nearest service point, or to email or leave a message on the answer phone so someone can contact them to discuss the application¹³.

A few products cannot be applied for online at all. Under a scheme to help homeless people open bank accounts, one banking group's basic account can be applied for in branch or over the phone but not online, and it is typically offered after a person has been declined for another current account; another bank's equivalent account can be applied for in branch, online, through the mobile app or by phone, but cannot be applied for directly, as it is offered where another application is more suitable¹⁴. More generally, opening a bank account usually means filling in an application form in a branch, online, or sometimes over the phone, and providing proof of identity including your full name, date of birth and address¹⁵. The same pattern appears across benefit and support applications: forms can be completed online, in person or by phone¹⁶, and some applications, such as Discretionary Support in Northern Ireland, can be made online or by phone¹⁷.

Whatever route you use, the practical points are the same. You will need proof of identity and, for most loans, details of your income and outgoings. Applying early matters where there is a deadline: students accepted onto a course are told to apply as soon as they can, with applications made online and progress tracked through the online account¹⁸. If you are applying for a basic bank account, you will often need to apply for one of the bank's other accounts first, such as its standard current account, and you can usually apply online, by phone or in a branch¹⁹. The route does not change what the lender must check, only how the form reaches it.

Secured or unsecured: what collateral means for your application

Before you apply, it helps to know which of the two broad kinds of loan you are being offered, because the difference changes what the lender can do if you cannot repay. Secured loans ask you to use your property as collateral, which means the debt is tied to the property³. The Bank of England puts it plainly: a secured loan means you borrow against an asset, such as a house²⁰. The Scottish Government's review of debt uses the same definition, describing secured debt as a loan secured against an asset to serve as collateral for the loan, such as a house²¹.

Unsecured loans do not ask for collateral³. Types of unsecured loans include personal loans, student loans, overdrafts and credit cards³. The distinction matters at the application stage and afterwards. A secured loan application typically involves the lender looking at the asset as well as your income, because the asset is what stands behind the debt. An unsecured loan application turns on your income, outgoings and credit history, because the lender has no asset to fall back on.

The practical consequence of collateral is risk. If repayments on a secured loan cannot be maintained, the asset the loan is tied to is at risk, which for most people means their home. Support schemes recognise this: under Scotland's Mortgage to Rent scheme, a homeowner must be ineligible for help through other UK Government support schemes such as Income Support for Mortgage Interest and Homeowners Mortgage Support before the scheme can help²². If you are struggling with a secured loan, the pages on missing secured loan repayments and your home and on debt set out the options. For a fuller comparison of the two kinds of borrowing, see secured or unsecured borrowing compared.

Affordability checks happen whichever route you use

The route you choose to apply by does not change what the lender must do before it lends. When agreeing to a loan, lenders need to make sure the borrower can afford the repayments without too much trouble, and they must show what checks they did if the loan is later complained about as unaffordable²³. This applies to guarantor loans as well as ordinary personal loans: the ombudsman service, which handles complaints about them, expects the lender to have checked affordability at the point of agreement²³.

Credit checks are part of this. Where a guarantor is involved, the lender will do a soft credit check on the guarantor, which is not visible to other companies and will not affect the guarantor's credit score²⁴. The borrower's credit file is also part of the picture, and how applications and repayments affect it is covered in how loans affect your credit file.

There are rules about what happens when an application is refused. Where an application for a payment account with basic features is refused, the institution must inform the consumer in writing and free of charge of the reason, advise how a complaint against the refusal may be made to it, and advise of the right to complain to the Financial Ombudsman Service²⁵. The underlying regulations set this out in full: the consumer must be told of the institution's complaints procedure, of the right to make a complaint to the Financial Ombudsman Service, and of the institution's contact details²⁶. So a refusal is not the end of the road: it comes with information about why it happened and how to challenge it. The page on loan affordability checks explains what lenders look at in more detail.

APR: how the cost of a loan is shown to you

The APR is the figure to use when comparing loans, and generally, the lower the APR, the better the deal². It matters because it takes into account the total cost of borrowing, including the total amount of interest you will pay, any additional charges such as a monthly fee for taking out the card, and when and how often you must pay the interest²⁷. Two loans with the same headline interest rate can therefore have different APRs if one carries fees and the other does not, and the APR is the figure that captures the difference.

The APR brings interest, fees and payment timing into a single figure.

The rules require the figure to be shown in a standard way. Quotations must denote the rate as APR, annual percentage rate, or annual percentage rate of the total charge for credit²⁸, which is why the same three-letter label appears on every loan quotation. Payday lenders, whose loans are the most expensive form of credit most people will meet, must tell you what their annual percentage rate is before you sign a loan agreement²⁹. The pages on loan APR, representative APR and personal APR explained and how loan interest is calculated go deeper into how the number is built and why the rate you are offered can differ from the advertised one.

One warning belongs here because it is about the moment of application: you are asked to pay a fee in advance for a loan is a warning sign of loan fee fraud³⁰. A legitimate lender's costs are reflected in the APR, not collected as an upfront fee before the loan is paid out. The page on whether a lender asking for an upfront fee is a scam covers this in full.

Turned down? No Interest Loan Schemes and other options

Being refused a loan does not leave you with only high-cost credit. The No Interest Loan Scheme works through a specific route: you apply for a standard product with one of the participating lenders and are declined, and your application is then tested for NILS eligibility and for affordability⁶. All customers who receive a no interest loan are assessed against affordability, and will only be lent to if it is responsible to do so⁶. So the scheme does not bypass the checks; it applies them to a product that carries no interest. The page on the No Interest Loan Scheme explains how it works in practice.

The No Interest Loan Scheme considers applications that participating lenders have already declined.

Other options exist depending on your circumstances and where in the UK you live. In Northern Ireland, if you have a low income and apply for certain social security benefits or allowances, any Jobs and Benefits office or Social Security Agency can ask for an application form on your behalf for the Housing Benefit and Rate Relief Scheme³¹. Budgeting Loans from the social fund can be applied for online or by post using a claim form downloaded from GOV.UK³², and the page on Budgeting Loans and Budgeting Advances covers what they are and who qualifies. Credit unions offer an alternative route to borrowing, often to people mainstream lenders refuse, and credit union loans explains how they work. Community lenders are covered on the page about CDFIs and affordable credit.

If your difficulty is a specific one-off cost, help may exist for that too: Age UK sets out how to get help with urgent or one-off expenses³³. And if the reason for refusal is your credit history, getting a loan with a poor credit history and near-prime and subprime lenders explained set out what the market offers and what it costs. Whatever route you take after a refusal, the refusal letter itself must tell you the reason and how to complain²⁵, so it is worth keeping.

Loan sharks: how to spot an illegal lender

A person who is not authorised to lend money is known as a loan shark³⁴. Loan sharks are not licensed to lend money and operate outside the law⁴: they are illegal moneylenders who charge very high interest rates and sometimes use threats and violence to frighten people⁴. They are known to approach people at moments of vulnerability; families in financial difficulty following a bereavement are one group they are known to target³⁵.

The warning signs are consistent across the guidance. Did they offer you a cash loan? Did they not give you paperwork? Did they add huge amounts of interest or APR to your loan? Have they threatened you? Are you scared of people finding out? Have they taken your bank card, benefit card, passport, watch, or other valuables from you?³⁶. A separate scam checklist points in the same direction: it could be a scam if it pressures you into making a decision, sets a short deadline, is threatening or unexpected, asks for personal information like bank details, tells you to transfer money, or says you have to pay to apply for or get something³⁷.

If you have borrowed from a loan shark, two things matter. First, what they do is illegal, but you have done nothing wrong³⁸. Second, loan sharks cannot take you to court for money: it was illegal for them to lend it to you³⁸. It is not a crime to borrow money from someone³⁸. The police might get involved if a loan shark has committed other crimes like assault, but the guidance is to contact the Illegal Money Lending Team first³⁶.

To check a lender is legitimate before you borrow, search the FCA Firm Checker and use the contact details listed there, not the ones given to you³⁰. To report a loan shark, call the government's confidential hotline³⁹, or contact Stop Loan Sharks, the service for people who think they have borrowed money from an illegal money lender³⁵. You can report a loan shark anonymously if you want to³⁶. The Illegal Money Lending Team's website is www.stoploansharks.co.uk and www.gov.uk/report-loan-shark³⁶. If you are worried that a fraudster has used your details, request a copy of your credit file to check for any suspicious credit applications⁴⁰. The full guide is at loan sharks and illegal money lending.

Where to complain if something goes wrong with a loan

Complaints about loans start with the lender and, if they are not resolved, move to the Financial Ombudsman Service. The ombudsman's consumer credit work covers complaints about payday loans, the affordability of the lending, being unhappy with the quality of goods bought or hired with credit, and other types of lending including mortgages⁵. Consumers who feel that they have either been given unaffordable credit, or that the lender acted irresponsibly in providing the product, may be able to complain to the Financial Ombudsman Service⁴¹. To take a complaint there, fill in the ombudsman's complaint form⁴².

A complaint goes to the lender first, then to the ombudsman if the lender does not resolve it.

Some complaints have their own routes. For car finance, the FCA publishes a list of lenders: search for your lender in the list and use the lender's complaint form, or download the FCA's template complaint letter or email and fill in your details before sending it⁴³. Complaints about the Student Loans Company go through its complaints procedure page⁴⁴. If your complaint is about something your bank has done, for example refusing to refund an unauthorised payment, the complaint is made by contacting the bank directly⁴⁵. Help to Buy: Equity Loan complaints can be made via email, telephone or in writing⁴⁵. In Northern Ireland, Consumerline can refer your complaint to the Trading Standards Service for investigation or to the Financial Conduct Authority, which authorises lenders². And where a court matter is involved, you can apply to a county court to claim money you are owed by a person or business, online or by post³⁹.

The rules give you a footing at the refusal stage as well: where an application is refused, the institution must inform you in writing and free of charge of the reason, advise you of its complaints procedure, and tell you of your right to complain to the Financial Ombudsman Service²⁵. The pages on complaining about a lender or finance company and complaining about an unaffordable loan set out the process step by step, and what to do if you can't repay a loan covers the situation where the problem is not the lender but the repayments.