Those interested in taking a personal loan, secured loan, homeowner loan, unsecured loan, guarantor loan or payday loan, need to know how difficult the process can be without open banking. You need to have a strong credit score and at least one utility bill in your name, to ensure your loan application gets approved, but even then there are cases where your loan gets rejected.
The way we apply for loans and the information that lenders need has changed, with the introduction of Open Banking, to open up opportunities for more individuals to have access to loans.
Open banking is a method where your personal and account information is shared with the lenders digitally, saving you the hassle of re-submitting records and statements at each visit.
It is a safe way of giving access to important information for scrutiny without having to release your passwords. Through open banking, the lenders will only gain access to information that they need, including your current transactions and account balance, helping them calculate your eligibility for the applied loan.
But before we let the lenders get to work, the team at Pixie Loan uses the method of open banking to make sure your loan application is genuine and worthy to be processed before we connect you with a lender within our partners.
Of course, when applying for a loan, the lender needs to run identity checks to ensure you’re eligible and that you can afford to repay the loan.
When you complete an online application for a loan, you will be asked for your basic contact details, your employment, income and outgoings, also the bank details of where you want the loan to be paid in – this has to be an account in your name.
Due to rules placed on lenders by the FCA (Financial Conduct Authority) in assessing affordability, they no longer require you to just have a good credit score to provide you with a loan. Lenders have to look at your income and outgoings to ensure that the repayments on the loan will not stretch your finances, leaving you in debt.
When completing an application for a loan, always be truthful with the information you provide as they can often see from your credit file if you have not been honest. This can affect the decision on the lender.
Open banking is a method to make information and data sharing smooth and easy while keeping it all confidential, between you and the lender.
With some lenders prioritizing affordability above bad credit history, ensuring the information provided in your application is essential to ensure they can accept you for a loan.
From the lenders having access to this information, they can see your regular income and outgoings, how your bank account is managed and if you can afford the repayments.
Not all lenders currently use Open Banking but, in the future, more and more lenders will start to use this method of assessing your ability to be given a loan by them, along with your social media score.
Lenders will have access to the information about how you manage your bank account and will also be able to see any payments to other creditors. However, they will already have access to details about other credits from your credit report. The big difference with being able to see your bank account, is that lenders can see your regular outgoings and if you have any issues paying these.
This can be a good thing. If you have a bad credit history, previously you may have been turned down for a loan. Now with Open Banking, if the lender can see from how you run your bank account that you are financially stable and can afford the repayments, you could be offered a loan.
Before we, as a broker, pass your details to lenders, we look at the information you have provided to assess your affordability. We then match you to lenders that may be able to provide you with a loan.
The whole process is very quick and only takes minutes to redirect to a lender that is happy to access your application. At this point the lender will ask you to provide access to open banking, to review your affordability.
At Pixie Loans, we wish to make the loan process smooth, safe and quick for both the lenders and borrowers..
Don’t forget, even if you have a poor credit score you could still get a loan with Open Banking.