Yahoo Finance 
The lenders who won't damage your credit score
The main problem with applying for most loans and credit cards is that applying leaves a mark on your credit record straight away, whether you're accepted or not.
That's why, if you make a few applications in a short space of time, lenders will be less likely to lend to you. They seem to believe it's a sign you're desperate, rather than someone who is sensibly shopping around!
The second problem is that you go through the time and effort of submitting all the detailed information they need about you to find the offered rate is either too high or you were rejected. Most frustrating. A soft check can require less information and paperwork, and you can put off reading the bulk of the small print until you're more confident of being accepted.
Six lenders claim to be different
Six personal loan and credit card providers stand out by allowing you to do quotation searches as standard. These 'soft searches' of your credit record don't leave a mark, unlike the full searches.
You'll then be given a quotation – an indication as to whether you'll be accepted – as opposed to a full offer.
Loans with soft searches
Here are the loans that come with soft searches as standard:
Loan | Interest rates | More information |
At least 5.3% over three years At least 5.8% over four years At least 5.8% over five years | Repay early in part or in full with no penalty | |
At least 5.9% for current-account holders At least 6.2% for non-account holders | N/A | |
At least 6.9% over three years At least 7.6% over four years at least 7.4% over five years | Repay early in part or in full with no penalty | |
encash | See below | Repay early in part or in full with no penalty |
The figures in this table are based on £7,500 loans. Shorter loans are usually, but not always, more expensive. If you want to borrow less money, you will normally be asked to pay more. Nationwide, for example, charges at least 11.9% for loans of £3,000. You can quite often get the same rates up to £15,000, however.
encash works quite differently, not least because it lends to a wider range of profiles than most lenders (from A* to E grade borrowers). This is probably what prohibits it from giving a representative APR like the others in the table, since the rate has to apply to half of its borrowers. It told me that the average rate – not the lowest rate – between all its borrowers of all grades is 13%.
Most of these rates are competitive. For comparison, the cheapest five loans of this size on the market all cost 5%-5.1%, through Derbyshire Building Society, Sainsbury's Bank, Clydesdale Bank, Barclays and Tesco. None of those lenders offer soft searches, even if you ask them nicely.
Don't get caught out: Nationwide's trading divisions, such as Derbyshire Building Society, do not offer quotation searches, even though they often have the best products in the group.
Only people with fantastic financial profiles should expect to receive the interest rates shown in the table. Everyone else will either be rejected or will probably be asked to pay far, far higher interest rates, and you should then be asking yourselves whether the cost is simply too much.
Zopa and RateSetter will lend to really great borrowers only.
[Related link: Take a look at the cheapest personal loans]
Credit cards with soft searches
Card | Balance transfers | Purchases | More |
0% for 26 months 3.5% fee | 0% for 6 months | N/A | |
0% for 24 months 2.9% fee | 0% for 3 months | N/A | |
Nationwide Select Credit Card (available to current account holders only) | 0% for 20 months 3.1% fee | 0% for 12 months | 0.5% cashback on all sterling purchases Unlimited commission-free purchases abroad |
0% for 20 months 3.1% fee | 0% for 3 months | You have to spend to earn commission-free purchases abroad | |
0% for 15 months 1.5% fee | 0% for 5 months | N/A | |
0% for 7 or 14 months depending on your profile 2.9% fee | 0% for 7 or 14 months depending on your profile | N/A | |
N/A | 0% for 6 months | You have to spend to earn commission-free purchases abroad |
*Barclaycard has many other different cards available, all with soft searches.
All these deals are either best buy cards or pretty close.
Not all soft searches are equal
There are no guarantees of success even after getting a positive soft quote.
Most of these lenders write on their websites that you're “likely” to be accepted if the soft search gives you a positive result. A spokesperson from Nationwide also told me: “It is fair to say that the majority of people who go on to fully apply for a loan get the indicative rate from the soft quote.”
After doing a soft search with Barclaycard, it will then tell you the percentage chance of being accepted after a full search.
Those trying to borrow from RateSetter have nothing to fear. The company tells you whether you're accepted without doing a hard search. Although the credit reference agency might ultimately oblige RateSetter to do a "hard search" before lending to you, RateSetter will only do so after you have accepted the quote, and the quote won't change as a result.
Zopa is similar. A spokesperson told me: “We don't change an applicant’s quote. What they receive initially as a personalised (soft search) quote is what they get as a final APR.”
Non-standard soft searches
In theory, any lender can do an ad-hoc soft search, but I've contacted building societies, banks and supermarket banks, and not one has yet revealed that it's willing to do a soft search even if you specifically ask for it. They all said they didn't do so, except a few who didn't answer me at all.
Discussion board users report having no success persuading them either. However, your own bank might pre-approve a loan based on your records with it. This is quite common, although presumably less so in these times, when banks are being more cautious about who they lend to.
[Related link: Pay off your debts for less with a top 0% balance transfer credit card]
