Perhaps you’ve applied for a loan in the past and been turned down, or maybe you have never applied for a loan before and are now considering one. It can be daunting to say the least as you look at all the financial lingo, repayment terms, interest rates, and more. To help you out we have put together a list of tips that can walk you through the process so you understand what is expected of you, what the various terms mean, and basically ease your fears when it comes to applying for a loan.
Start with Your Credit Score
A great place to start as you begin the loan process is to look at your credit score. Your credit score will play a vital role when it comes to the approval process. It’s best to know what yours is in advance so there are no surprises. If your credit score is bad you’ll need to look into lending institutes that offer high risk loans.
A place such as money hub actually offers free quotes online, which can give you a real quick answer on where you stand. Keep in mind if you are a high-risk customer, it will limit you in how much you can borrow.
Gather Up Your Documents
Now that you have determined your credit score, your next step should be to gather up your financial documents. This is another piece of material the lender will want to see from you. The specific information they collect will help them to determine your debt-to-income ratio. This is a fancy way of saying how much you currently owe to creditors versus how much money you make. The lender wants to make sure you’ll be able to repay the loan on time.
Where to Look?
With so many different lending institutions available it can be hard to determine where to look. If you have a poor credit score you’ll want to find those places such as money hub, but if you have a good credit score you’ve got a few more options. Ideally, use a local lender. This makes it convenient for you to set up a meeting whenever you have questions or concerns. You also want to be sure you pick a reputable lender, so going with someone local means you’re more aware of the reputation the lender has in the community.
Be Clear on Secured vs. Unsecured Loans
One of the biggest choices you’ll be faced with is a secured vs. unsecured loan. A secured loan will offer lower interest rates, which means you’ll end up paying less to borrow the money. However, it also means you need to “secure” the loan with something such as your car, house, or some other form of collateral. If you default on the loan, the bank will take that collateral.
With an unsecured loan you don’t need to have any collateral, but you will pay a higher interest rate.
Be Confident in the Decision
Even after looking over the paperwork, you still need to be confident in your decision. Don’t feel pressured to sign on the dotted line until you are clear and comfortable in the terms.