We often get asked about how we decide is someone gets a loan or not. Not everyone is successful when they apply for a loan, and there is a good reason for declining a loan, particularly if granting the loan would damage the financial well-being of the applicant.
As a community, member-focused business, Hoot makes sure that every loan application is assessed on its merit and according to individual circumstances. The decision is made by a person, not a computer so you know that your circumstances are always taken into account.
There are three stages to making the loan decision, all based on the information you provide.
Affordability
Affordability is about being able to meet your household expenses and credit commitments, be able to pay the Hoot repayments and still have something left over for savings or emergencies.
We will look at your bank statements or Open Banking link to check your income and outgoings to make sure you can meet the repayments.
As a responsible lender we cannot offer a loan to someone if we think they cannot afford it.
Credit History
We check your credit report to see how you are managing any debt you already have.
We will see what other credit you have like credit cards, loans, home credit or finance and make sure you are repaying those. This tells us that you are managing your credit.
Missed payments, defaults, debt collectors or CCJs will tell us that you are not managing your credit well. It may not stop you getting a loan with us but it will affect the decision.
We will not lend to you if doing so makes your situation worse, or if your credit report tells us that you are not doing anything to repay other debt.
Your individual circumstances
Once we have checked affordability and credit report we will look at the other information we have to help us make the final decision.
If you are already a member, we will look at whether you have had a loan with us before, and if you have repaid it with no missed payments.
We will also look to see if you are saving with us too. Saving is an important part of being a Hoot member. If you are successful in getting a loan, you will be expected to save a little whilst you are making your repayments.
We will also look at any documents to verify your identity and to confirm any income you say you have. We may ask you more questions before making the decision just to be sure we are lending responsibly.
Making the decision that is right for you
We can’t always give the the answer you want and it is important to us that we don’t make your financial situation worse by adding to your spending or to your debt. Borrowing is not always the best solution. When we decline a loan we will always give the reason why and tell people about where they can go to get help with their finances.
Most of our members who have been successful in getting a loan are saving for the first time and building up a buffer for the future.
The financial well-being, of our members and the community is at the core of our values and we think that lending responsibly plus encouraging savings are the key things in achieving that goal.
Provident Financial has announced this week that is to close its doorstop lending business after a wave of compensation claims. Provident has been a key source of loans for people with poor credit ratings for 141 years and its demise with have a worrying effect on their financial well-being.
Access to a legal and affordable source of credit is limited for many people with poor credit ratings, and limiting that access even further might mean more people will turn to loan sharks for quick and easy loans. But doing this can have devastating consequences and put people into a spiral of debt that will affect their mental health as well as their finances.
There is another way. Credit unions are a fair and legal source of loans for people with a poor credit history. As local community-owned financial services providers, they have their members (because that is what we call our customers) at the centre, and take individual circumstances into account.
Last year Hoot members saved over £1.2m in loan interest by taking their loan with us rather than a doorstep lender or loan shark. The added bonus to borrowing from your credit union is that you save as you borrow. Most new borrowers with Hoot are saving for the first time and building a nest egg of savings for the future.
So beware the ‘easy fix’ of your local, illegal money lender. If you are offered a loan with no paperwork, it will be unregulated and you will stand to lose a lot of money in the long run.
Go to our loan pages to see how this safe and affordable alternative is the better way to go.
Anyone who thinks they have been caught in a trap by a loan shark can contact the Illegal Money Lending Team confidentially on 0300 555 2222 www.stoploansharks.co.uk
You hear this phrase all the time, but do you know what financial well being means and how you can achieve it?
Generally, the path to financial well-being is to having these four things:
Control of your daily finances
Ability to cope with financial shock
Knowledge your financial options
On track to meet financial goals
How do we achieve a feeling of financial well-being?
Achieving a state of financial well-being requires that you examine what you want your life to be like; how you want to live, and what choices you need to make now and in the future. Using the SAM action steps helps you to think through your options and make informed decisions that fit your lifestyle and values.
Size up your situation – make an appraisal of level of financial well-being now
Analyse your circumstances – what are your options to begin the journey
Make a plan – develop a game plan for the long-term
Finally – what do you value?
Examining your values lets you clearly understand what matters most to you and why you set the goals that you do. The judgments you make begin to reveal patterns in your behaviour that are specific to you and your values; so when you begin to make the hard choices, remaining true to your values and goals makes the process much easier
Examining your current situation, knowing your values and setting realistic goals will help secure your financial future.
Well here we are a year on from the start of the pandemic and, I don’t know about you, but I am beginning to feel there is a light at then end of this tunnel. Everyone I speak to has mixed emotions of excitement and caution.
Excitement because we have not been so close to being able to meet up with friends and family, get back to work or go on holiday. Cautious because it has been some time since we felt able to go about our daily business the precautions of masks, social distancing and hand sanitising.
Still open for business
We are proud that we have never had to close for business in the last year. Our branch may have had shorter opening hours, but use of our online services has more than doubled. Over 4,000 of our members manage their Hoot account via the App or member area. Members have had uninterrupted service during this time and we have had over 1,000 new members join us.
Are you suffering financially?
Sadly, many members have suffered financially during the year and have fallen behind with loan repayments. For those who have contacted us, we have been able to find a way to help them get through this difficult period. It may be just a short-term thing that we can help with; or if something more serious where we can point you in the right direction. If you find you have fallen behind, please don’t ignore it contact us; I am sure we can find a way to help.
Credit unions value their members and are here to help so we dislike taking any kind of action with regard to people who cannot pay their loan. The money you have borrowed comes from the savings pot of other members. We therefore have a responsibility to help you to pay us back. You should remember that, if you do not repay your loan, your credit rating will be affected and you may find it harder to get credit in the future.
Don’t ignore it
If you find you are getting overwhelmed with debt don’t be tempted to go to a debt management company or dive straight into an IVA without getting free advice first. Not doing this may cost you dearly and you could end of paying more to the DMC in fees than you are paying to reduce your debt. Contact an organisation that gives free advice such as Stepchange or Payplan who can help you to get the best solution for you, because they are not taking a fee.
Our help pages have lots of information about managing your money including contact numbers.
Finally, money worries are one of the biggest causes of stress. Make an appointment with your GP or go online to www.nhs.uk and type ‘money worries’ into the search box for advice Often just talking to someone about your worries helps a lot.
Did you know younger adults are more susceptible to financial scams?
I was very surprised to learn this week that 16% of 18 to 24 year olds surveyed by the Financial Conduct Authority’s Financial Lives survey had paid money out to a Covid-19 scam. This compares to just 1% of over 55s.
There are a lot of scams out there and it is upsetting to know that someone will always try to profit from others misfortune. The most common have been offering financial support, charging for the Test and Trace service or offering six months of free TV license. According to the FCA, 1.4 million people say they have paid money out as a result of a Covid scam. And, as you might expect, the most vulnerable of our society have been the worst hit.
The key to protecting yourself against scams is to check thoroughly who you are dealing with, never give out personal information unless you are absolutely sure, and remember, if it’s too good to be true- it probably is.
