You are here: Home - Credit Cards & Loans - How to -

Applying for a loan: how to dodge the ‘underhand tactics’ used by banks

Written by:
Loan providers are using ‘underhand tactics’, which are costing Brits as much as £400m a year, a report claims.

Consumers are being punished for shopping around, with banks making a hard mark on their credit file just for asking for a loan price or quote, TSB research found.

Many providers also hide important product features from consumers, which could save or cost them money, the bank suggests.

Paul Pester, chief executive of TSB, said: “I was genuinely shocked and amazed to discover the underhand tactics employed by loans providers. So much so, we just had to blow the lid of this broken market.

“For any market to operate well, consumers have to be able to shop around, understand what they’re buying and be able to switch providers easily. What other industry penalises you just for shopping around to try and get a better deal?”

Nearly one in ten people in the UK are thought to have a personal loan.

However, 61% of loan providers don’t show consumers their final interest rate without completing a hard credit check.

These providers make customers apply for a loan without giving them any certainty about what interest rate they will be offered before they apply.

If the customer decides to shop around for more quotes, these hard marks remain on their credit score and over time these marks can restrict the amount of credit available to borrowers.

A recent study by YouGov for TSB found that 40% of consumers who have taken out a personal loan in the past five years have no idea whether or not they received a hard credit check when they asked for a quote.

Top tips to getting a loan

  1. Work out what you can afford

The first thing to do is work out whether you can afford the loan. You can work out how much you will have to pay back every month using a lending calculator on one of the price comparison sites or on many providers’ websites. Moneysupermarket has one here or try the one from the Money Advice Service here.

  1. Check your credit report

Your loan provider will use your credit history to figure out how likely you are to repay your debt. If there are gaps or black marks on your credit report it’s best to sort these out before you start applying for a loan. Experian, Equifax, Callcredit and Clearscore are four of the big credit checking firms.

There are various tactics you can use to boost your credit score such as being on the electoral roll and cancelling old direct debits. For more tips click here.

  1. Shop around

Look at a number of different products before applying for a loan.

Comparison sites such as and Moneysupermarket have pre-application eligibility screening tools, which enable customers to see their likelihood of being accepted before they complete a full application.

The tools use a ‘soft-search’ of the customer’s credit file which, unlike the hard search used in a full application, has no impact on their credit score or their ability to get credit in the future. This opens up more choice for consumers so they can shop around without risk.

  1. Check the terms and conditions 

Price is important but other features can make a difference when it comes to picking a loan. For example, find out whether you can take a repayment holiday or ask how long it will take for the money to hit your account.

  1. Review your product and switch if necessary

Deals come onto the market all the time so it’s worth checking the market regularly and switching if you can save money.

Check for any early repayment charges before switching though.

Alastair Douglas, chief executive of, said: “It is possible to switch loans provider, but it’s much harder than switching a mobile phone provider, energy supplier or current account.

“Instead of changing providers directly, you must take out a new loan with a new provider (and better APR) and use that to pay off the old loan. This could save you money as you could take advantage of the better loans rates available at the moment than when you took out your previous loan. But of course there’s always a risk you won’t be accepted for the newer loan with a lower APR. That’s why the soft searches and eligibility checks are so important. We hope that this issue is looked into further from our industry.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

Your rights for refunds if travel is affected by strikes

There have been a wave of strikes this year across many different industries, and more are planned over Christ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week