How to Get Approved for a Loan
Apply for a Loan
There are certain times in life when a loan simply makes sense. For example, if you’re planning on purchasing a big ticket item such as a car or home, a loan is quite necessary. Unfortunately, wanting a loan and actually being approved for one are two very different things. If you’re planning on applying for one soon, this guide will provide you with everything you need to know about the process.
There are also many loan calculators online you can use to get an idea of what to expect. The US Bank has one that will estimate monthly payments, depending on how much you borrow, interest rates, and and the terms.
Unsecured vs. Secured
Right off the bat, you’ll notice that many lenders provide both unsecured and secured loans. Personal loans are typically unsecured, but make sure to check the fine print; this may change depending on your reason for borrowing.
Unsecured loans are permitted without collateral protection while secured loans do have collateral protection. Generally, the better your credit, the higher the chance you’ll be approved for an unsecured loan. Be sure to ask questions and do research to determine which option works best for your needs.
Your Credit Score
Bad credit and even no credit can be grounds for instant loan denial. Before applying, talk to the lender about their policy on credit, and perform an audit of your own credit report to ensure that it’s currently in good standing. If you already have a significant amount of debt, your approval could be affected.
There are different ways you can check your credit score. You can contact companies like Equifax, or inquire at your local bank. A credit monitoring company will also have plans you can purchase to monitor suspicious activity, and ensure your accounts stay safe.
Almost any lender will require that you provide proof of stable employment in order to be approved for a loan. To be specific, the lender wants to know that you will be financially able to repay the loan once it has been issued.
The lender might also request references to build stronger trust. It’s as simple as asking your employer for a letter of reference to prove you have a stable income.
If you are self-employed, the lender may ask for proof of income to show that you have finance stability. Be prepared to show documentation as needed.
Filling Out the Application
You might be surprised to find that the actual application isn’t terribly in-depth. For example, if you’re applying for a personal loan, you’ll be asked for basic information about your identity (used to pull your credit report), as well as information about your employment, assets, bank account, etc.
Always be honest when disclosing information on a loan application. Dishonesty and deception will only lead to denial. Furthermore, the lender will likely refuse to do business with you ever again.
Understanding the Terms
Before signing off on any loan, it’s imperative that you closely go over the terms with the lender. You’ll want to ask about the length of the terms, the associated interest rate, the initial line of credit, stipulations for repayment, late fee assessments, hidden fees, etc. You never want to feel less than confident when agreeing to borrow money.
Avoiding Multiple Loan Applications
If you’re trying to get “fast money,” don’t rely on placing multiple applications at once. When several lenders all attempt to pull your credit at once, this can have significant repercussions for your score. This is simply because your credit takes a small ding any time your report is pulled.