Personal Loans: are you Typical?

by : J Tillotson

When looking around for a personal loan, most people will first look at the APR. If you have a perfect credit history then this is a good indicator for you, but if you're one of the millions in Britain with a less than perfect score, it may be misleading.

The words 'Typical APR' are what lenders use to draw you in. In truth, only a small percentage of applicants actually get that golden figure. The fact that they say 'Typical APR' and not 'Actual APR' means that the interest varies for each individual.

The word 'typical' is not one that applies in most cases, at least not in the world of finance. For someone to get the typical APR they would have to have been extremely diligent with their credit in the past - not, as some people think, have no credit at all. Having no credit history makes you unpredictable in the eyes of the lender, and it's almost as hard getting credit with no rating as with a bad one.

The ideal borrowers for personal loans are usually married people who have a mortgage, several credit cards, all of which are paid off on time or even before, has been living in the same place for years, has been with the same bank for years, and has been in the same job for years. Basically, someone who can represent stability.

The good news is, any blemishes on your credit file won't stay there forever. Missed payments disappear after 2 years provided the debt got paid eventually, and CCJ's and bankruptcies get wiped after 6 years. If you are issued with a CCJ and pay it off within a month, it won't show up at all. If you have satisfied debts that are still on your file, attaching a notice onto it will let potential creditors know that you now have no outstanding arrears. It also shows them you are keeping an eye on your credit file.

So, once you've got yourself a cleaner credit file, you stand a good chance of getting closer to that lovely shining 'Typical APR'. It's worth remembering however, that different lenders look for different criteria when approving personal loans, so while you may not fit one lenders profile, you could be perfect for another. Your safest option is to get your file as clean as you can, and make sure you settle any debts before applying for more credit. Every time you apply for personal loans, or credit cards, it leaves a footprint on your file which, if there's a large quantity in a short space of time, could put lenders off as it implies you're desperate for money.