Understanding loans

Read answers to frequently asked questions, including what you can (or can’t) use a loan for and what credit scoring means.

  • You can borrow for a wide range of reasons from weddings to buying a new car. In terms of responsible lending, there are some limits on what you may use a loan for.

    Loans cannot be provided for:

    • Speculative purchases, for example: gambling, investments and share purchases
    • Any illegal purposes
    • Business related purposes
    • Purchase/Lease of land or property, either full or part purchase (including deposit)
    • Timeshares/Holiday Clubs

    These limits apply whether you want to borrow money for yourself or to help support someone else. For example, you can't borrow to give a family member a property deposit.
     

  • APR is the amount you're likely to pay on top of your loan each year, including interest and all fees and charges. It's shown as a percentage. The amount you pay is worked out based on how much you still owe over the duration of the loan, not the initial amount.

    The representative APR (Annual Percentage Rate) is the rate shown when we advertise credit products. The rate shown will apply to the stated range of loan amounts and length of loan. It means that most customers are likely to get this rate when they apply for a loan that falls within the representative APR.

    If you apply for a loan, the actual rate you're offered may differ from the representative APR. The rate you’re offered will be based on checks about you and your personal situation.

    You can use the APR to compare the cost of credit products from other lenders.

  • Credit scoring is something that most lenders use to decide whether they'll lend money. When you apply for a loan, the lender will work out a credit score for you.

    This credit score is based on the details you provide, along with other information such as:

    • Your employment history.
    • How you manage your accounts.

    Details from credit reference agencies will be used when checks are made. These agencies include Experian, Equifax or TransUnion, who keep records on your borrowing and payment habits. This includes details on:

    • How much you're borrowing right now.
    • How well you've managed your past and current financial commitments.

    The level of risk involved is an important part of any decision to lend. If you have a number of missed or late payments you might be seen as a 'high risk'. If it appears that you're 'high risk' then you might not be offered a loan. In some cases, you may be offered a loan but at a higher rate of interest.

    If you've got any concerns about your credit rating you can get a copy of your credit file with any of the credit reference agencies.