How to choose a lender

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How to choose the correct lender

However good your financial self-care is, sometimes we all need a helping hand when it comes to money. Taking out a personal loan is one way to borrow and pay back a fixed amount every month so you can budget for repayments.


Whether you’re looking to buy a car or to consolidate your loans into one single monthly payment, a personal loan could be the right choice.


But do you know how to choose a loan lender and get the best deal on your loan? Read on to find out more about lenders, loans and the essential questions you need to ask.

Is it better to get a loan from a bank or a lender?

Your bank is usually the first place you think about when you’re looking for a loan but they’re not always the best option. If you want to borrow small and repay fast, or you have a poor credit score, then a bank loan might not work for you.


If you want to borrow a larger sum of money and enjoy flexible repayment terms, then your bank should have a wide range of loans to suit you. They can also offer low interest rates, but expect to pay extra fees if you want to repay early.


If your credit score isn’t as healthy as it could be or you have a thin credit file, you may find a lender is a better option. You’ll be offered a smaller loan but you can apply online and receive instant approval. You’ll also be able to manage your account online, putting repayments and better budgeting at your fingertips.

Remember that interest rates will be higher because you’re borrowing less and repaying faster. Missed payments can impact your credit score, although making regular payments can help you build your credit rating.


There are advantages and disadvantages to using banks and lenders. If choosing the right lender seems daunting, then make sure you seek independent financial advice to help you find a lender and a loan that suits your situation.


If you’re worried that your credit score will result in high interest rates, choose a lender that uses Open Banking (like us at Salad Money) rather than a credit score to assess your finances. 

What questions should I ask a loan lender?

Whichever option you choose, there are some key questions that you need to ask your chosen lender before you commit to taking out a loan.

1. How much can I borrow? Whether you’re taking out a loan to consolidate your debt or for a home improvement project, you’ll need to know that you can borrow the amount you need.


2. What interest rate will I pay? The interest rate you’re offered will depend on the amount of the loan, the time you take to repay and your credit score or financial situation. The lower the interest rate, the less you’ll pay over the lifetime of your loan. That is, unless you use Salad Money. We offer two rates and don’t take credit score into account. 


3. How long will I be paying off this loan? The length of time it takes to repay the loan will be your decision, but it’s important that you’re able to make the monthly repayments. The more quickly you want to repay the loan, the higher the repayments will be so make sure the monthly repayment is affordable.


4. Will I have to pay any fees? Hidden fees can add to the cost of your loan so make sure your lender is transparent and honest about any extra charges. Look out for early repayment fees and charges for late payments. You should also check if you can take a payment holiday if things change and you struggle to make the repayments.


5. What’s the best loan for me? Look for a lender who offers unsecured loans. Most personal loans don’t need to be secured against your property or other assets so you won’t run the risk of losing your home if you can’t make the repayments. 

How do I choose a loan lender?

The loan lender you choose will depend on the type of loan you’re looking for, the amount you want to borrow, the repayment period and your credit score or current finances. Before you approach any lender for a loan, make sure to get a free credit report and challenge any anomalies so that you have the most accurate credit score possible. If your credit score isn’t looking good, then keep an eye out for lenders that rely on Open Banking instead.


Next, you can start comparing the types of loans that are right for you, whether you need quick cash or a larger amount. Then do your research and start comparing loans using a comparison website. Check our tips on recognising affordable loans so you know what to look out for.


Ask for advice from family and colleagues who may have taken out personal loans. Check ratings sites for an accurate picture on customer feedback. Don’t be afraid to ask around and don’t make an application until you’re sure that a loan and the terms and conditions attached are right for you. 


Applying for a loan can cause a dip in your credit score - too many enquiries in too short a time can do some serious damage. So make sure that the loan you’re applying for is right for you before you make an application.

What is a direct loan lender?

If you want to borrow money fast then a direct loan lender could be the right choice for you.

A direct loan is agreed directly between you and the lender. You make the application and the lender loans you the money which is deposited directly into your bank account.


For example, at Salad Money we’ll ask you how much you’d like to borrow and how long for. You’ll see at a glance exactly how much you’ll be expected to repay and your money will be in your account by 12pm the following day.


A loan from a direct lender is a great way to deal with the unexpected bills life throws your way. Although the interest rate can be higher than on a larger loan, the repayments are smaller, giving you a useful financial breathing space so you can get back on track.


Once you’ve chosen the loan that’s right for you, applying online is quick and convenient. At Salad Money we use Open Banking, an FCA regulated service, that gives you complete control over how we use your bank details. That means we can fairly assess your application without impacting your credit score in any way.

Simple and convenient, applying for a direct lender loan could be a good choice for you to help you cope with life’s little emergencies.

What should I look for in a loan lender?

Taking out a loan needn’t be daunting if you pick the right lender. But how do you choose a loan lender who’s committed to responsible and affordable lending?

You’ll need to know that your lender offers competitive interest rates and APR. They should also be clear and transparent about any additional charges, including late payments and early repayment fees. All documentation regarding your loan should be in plain English and easily available so you can see at a glance what the lender promises to do.


Always look for an FCA-regulated lender. That way you’ll be fully protected as a consumer and you can relax knowing that your chosen lender follows a code of conduct that is designed to keep you and your money safe.


Before you take out a loan, check whether your lender is flexible enough if your circumstances change and making your repayments becomes difficult. At Salad Money we make sure to check the affordability of your loan before we lend you money so you don’t get into difficulties.


If you’re employed and looking for a credible and trustworthy lender, then Salad Money fits the bill. We’re fully FCA regulated and our goal is to give small, fair and affordable loans to people who need a helping hand once in a while. 

We believe in ethical lending using Open Banking to give you total control. If that sounds like the loan you’ve been looking for, contact us today or apply online now. 

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