Need a hitman? Take out a loan!

In between a credit card and a mortgage is a personal loan. We need them for all sorts of reasons, but perhaps none so macabre as Zoe Kenealy, 44, a care worker from Croydon.

Hardly the sharpest tool in the box, in December 2006 Kenealy took out a £4,500 loan from Welcome Financial Services ostensibly for a new bathroom (she initially applied to Northern Rock for £10,000 but was turned down). However, the real reason she wanted the money was to pay for a hitman to murder her husband so she could claim £33,000 on a life policy (I'm not making this up).

But her deviousness was tempered with stupidity, as she gave her next-door neighbour Lee Waite (with whom she was having an affair) a payment of £3,000 to hire an assassin for the job, but he pocketed the cash and disappeared. Even more desperate for the money, she then applied to Tesco Personal Finance for a loan of £10,000 (rejected), and finally turned to her family for a loan, telling them the truth about why she wanted the money. Not unreasonably, they shopped her to the police and last month (April 2008), she was convicted at the Old Bailey of soliciting to murder and will be sentenced in June (the offence carries a maximum life sentence).

For many starting to feel the effects of the credit crunch, their only incredulity will be not that she wanted the money to kill her husband, but that someone actually lent her it! The drying up of liquidity in the global financial system means fewer mortgages on offer, credit card applications rejected and personal loan applications scrutinised and vetted more closely than previously.

Want the personal loan that is right for you? Find it with Moneyextra's comparison service.

Feeling rejected?

Recent data from Northern Rock suggests the conversion from application to acceptance is between 30-40%, meaning the now state-owned bank is cherry-picking the best prospects and rejecting up to 70 per cent of its loan applications. And thats High Street. In the adverse and secured loans market, Norton Finance says that, from April 2007 to April 2008, its rejection rate was 21%.

These are but two examples of lenders tightening their criteria for lending; and, although few lenders are willing to go into specific detail what they look for on a loan application, that could be the difference between acceptance and rejection. If youre looking for a personal loan (hopefully not to finance a hitman), there are a number of things you can you do to shorten the odds in your favour of being accepted.

Many believe that the first step in the applications procedure for a personal loan is when you log on to Moneyextra and look for the lowest rate on the amount you need to borrow, and that's the first mistake the potential borrower makes. Banks rarely make the decision to lend to you based solely on the guff you've put on the application form. They also rely on third part sources such as credit reference agencies.

How to 'score' a loan

The first thing credit reference agencies look for for on the lenders behalf is whether or not the applicant is on the electoral roll. Data from CIFAS, the UK's Fraud Prevention Service, shows that fraudulent applications rose by over 20% in 2007 compared to 2006. And worryingly, the numbers of fraudulent applications that succeeded in being granted credit were up by nearly 65% year on year. So the first thing a lender wants to know is that you live at the address youve supplied and the easiest way of checking this is with the electoral roll.

The leading credit reference agencies "score" potential borrowers with points allocated for various lending criteria and the more points on the score, the more creditworthy the borrower. The agencies themselves don't approve or veto your application, but the information they provide influences the lender and is a large contributing factor in you either getting the nod or a knock back.

Is your credit record correct? Check your credit reference, credit file, credit score with CreditExpert from Experian.

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Martin Fagan
13 May 2008 © Moneyextra.com

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