4 Things to Keep in Mind When Applying For a Loan

Whether waiting to hear back about getting a mortgage approved or obtaining that last bit of financing for school, getting approved for a loan may not be the simplest thing to accomplish. There are many steps that are involved with trying to get this financial supplement. From filling out applications, interviewing with a lender and getting a credit check, there are a good amount of things you need to get done. Lenders will take these precautions in order to ensure they are giving out a loan to a respectable person who will be able to pay everything back. These may seem like they will take awhile, but there is no need to get stressed out about the process. By following and understanding a few steps in getting a loan approved, you will be able to get through the procedure seamlessly.

Inspecting your credit report

Before you start applying or even deciding what type of loan you will apply for, it is important to inspect the state of your credit. Your credit history and credit score are the primary things lenders will look at when considering you for a loan. Credit history and a credit score is important because it is a summary of the your credit past and how you pay back other loans. A credit report will have all your credit history, such as open lines of credit and payment history, and your credit score. The higher your credit score, the better chances you have at getting your loan approved. MyFICO, which is one of the most common credit score evaluators, has a sample range such as this:

  • Excellent: Anything above 720
  • Good: 680 to 719
  • Average: 620 to 679
  • Poor: 580 to 619
  • Bad: 500 to 579
  • Terrible: Anything below 500

Before you start researching a loan, check out your score and see what range it is in. If it is in any of the categories that are below 720, you should start to improve it immediately. Now that you have figured out what condition your credit is in, you can begin looking for loans.

Commence research beforehand

When you are deciding what type of loan you are going to get, whether it be for a car or for your education, keep in mind there are many types of loans that are available to you. For instance there are several types of loans that can help a student pay for college, such as a Stafford loan or a private loan from a bank. As a prospective borrower, it is important to do a fair amount of research before signing up for something. Doing this step will not only help you know the situation you are going to get into, but will educate you about what steps you should take next.

Keep in mind that your first choice may not be approved. This provider may have everything that is right for you such as amount of time you have to pay back the loan, but it is entirely possible they may reject you. This can be for a number of reasons such as having a low credit score or having a bad repayment history on your credit cards. While improving your credit score, you should always try to have a few options when it comes to a provider. Having more than one option will help you out.

Continually ask questions

If you have found a loan that is right for you, call up the loan provider you feel comfortable with and begin asking them any questions about it. Signing up for the loan without fully understanding all the rules involved may end with you in financial jam. A good rule of thumb during this time is to write down your list of questions. These can range from asking how long the standard timeframe of the loan is to what the interest rates will be over the allotted time. By asking questions, you will have a better time with understanding what type of loan you are getting

All necessary documents

In order to get approved for a loan or even apply, you will have to show a certain amount of documentation to the provider. This is done to not only prove who you are, but to show you have the means of supporting this loan. When calling a provider and asking them questions about the loan, ask them what documents they will need to see. Commonly, they will want a copy of your credit report, proof of employment and housing documents. Every lender is different with what they want when approving a loan, but you will want to have these documents. Make a checklist of everything you need, that way you will have a good amount of time to find or send away for the proper documentation.

Posted in Lending
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