Getting the Facts: 8 Things You Need to Know Before Applying for Your Next Loan

No matter how careful you are with your finances, unexpected expenses can sometimes hit you completely out of the blue. A medical bill that appeared from nowhere, home renovations, a sudden urge to take a vacation to avoid suffering a burnout… and the list goes on. Understandably, no one should just jump into applying for a loan without a solid ground on how things work in the financial realm, so in that spirit, here are 8 things to know before you proceed:

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1. Have a plan on how to repay it

Not having a steady stream of income and trying to apply for a loan is a bad idea. Not only will you not be able to repay it on time, but it’s also highly unlikely you’re going to get approved in the first place. Even if you do have one, you’re going to need to gather all the necessary means of proving it before you apply. Usually, a letter from your employer will suffice. For those of you who are self-employed, it gets a bit trickier, but it’s still doable – just dig up the tax returns for the past two years and that should be it. If you have money coming in from other sources (such as part-time work), you’re going to have an easier time paying back the loan.

2. Minimize the lender’s risk

Your finances can be examined from a purely mathematical standpoint. The lender will take a look at your assets and subtract your liabilities; that’s how your net worth is determined. The former is a sum of what you own – such as your property, and the latter is a sum of your obligations – such as your mortgage. Understandably, the lender is running a business, and as such, looking for ways to minimize the risk is of paramount importance. So do what you can to present yourself as a financially stable individual and gather all the evidence necessary to back your case.

3. Know there are different types of loans

Depending on your needs, there are different types of loans you can choose from, with personal loans being the most popular ones by far. While some lenders have tighter requirements than others, there are personal loans guaranteed approval. Otherwise known as secure loans that are backed by collateral, these are particularly suitable for people with no credit history whatsoever. Then again, if your interests are of commercial nature, consider getting a business loan; once again, there are plenty to choose from. Lines of credit, term loans, equipment financing loans, and so on. There are also specialized loans you can apply for such as auto loans or student loans. When it comes to loans in general, there is no one-size-fits-all solution – it always depends on your needs.

4. Interest rates are one of the most important considerations

Interest rates have a great deal of influence on how much you’re going to end up paying in total. It’s hard to give any general advice on the subject because these can greatly vary from lender to lender. In fact, they can be anywhere between 5% and 35%, which can make quite a substantial difference, especially over the long term. Note that interest rates may not be the only fee you’re going to end up paying. Some lenders will charge you processing fees and some of them even impose a penalty for paying off the loan early, costing them valuable interest rate earnings in the process. Bottom line: every lender is different so always make sure to do your due diligence.

5. It’s a good idea to exhaust your other options first

There are alternatives to getting a loan, all of which should be considered before applying. If you have friends or relatives who could be lending you some money, it’s always better to ask them for help first. After all, no one will offer you as favorable terms as them; in fact, they may not even ask you to pay them back (but make sure to have a clear dialogue about the topic at the very beginning, otherwise you may jeopardize your good personal relationship with them). But if they insist on repayment – which they have every right to – it’s good practice to formalize the agreement in one way or another. Even so, there’s no need to be a burden to your friends and family, as there are other options; credit unions are one of them, and if the situation is suitable, you may even turn to your local church or get in touch with a charity.

6. Every loan comes with its own set of requirements

Depending on the type of loan you’re after, there will always be some requirements you need to comply with. But the following requirements universally apply to all of them:

– You need to be at least 18 years of age.

– You need to be a resident of the country.

– Your financial circumstances need to be proven.

– You need to have a steady stream of income.

Bear in mind this is the bare minimum – depending on the lender, other requirements and restrictions may apply.

7. Know the common loan terms

You’re probably familiar with the interest rates already; basically, this is a portion of the repayment the lender collects each month. The loan term is the total number of months you’ll be paying it off. The annual percentage rate is what the lender will charge you in addition to the interest rates. Finally, the principal is just a fancy way of describing the total amount of money borrowed. This is the basis on which the lender charges you interest rates. As you keep pacing back the loan, the principal decreases, and so do the interest rates.

8. Make a couple of price comparisons

Don’t just dive right in and pick the first lender you see. If you take a little bit of extra time to do some in-depth research which includes comparing prices online, chances are you’ll be able to find a much better deal in general. While you’re at it, it’s good to check up on their online reputation by visiting customer review portals and social media. As much as the lenders can afford to be picky in regards to who they take on board, you – as the loan taker – must be at least equally as careful and only work with the ones you can trust.

Conclusion

Based on these valuable pieces of advice, applying for your next loan should be a breeze, as long as you’re aware of your options. So make sure to do all the research necessary and only apply for a loan when you’re completely comfortable with it.

Denied! Advice On How To Get Your Loan Application Accepted

When money is tight, there’s one thing you can rely on – a personal loan. Banks are usually happy to accept an application as long as the applicant is deemed trustworthy. Then, you can use the cash to rebuild your finances and steadily get out of debt one step at a time.

But, what if a lender won’t process your file? What are your options?

Denied! Advice On How To Get Your Loan Application Accepted - loan agreement image
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You can try other creditors, such as a family member, yet they might not be able to help. The best option is to make sure you don’t get rejected, and here are the tricks of the trade which will help.

Check Your Rating

Lenders use credit ratings to figure out whether a loanee is eligible for a loan. If yours is bad, there’s a good chance it will get rejected very quickly. By checking it beforehand, you can decide if it needs some work. Should it require rebuilding, there are things you can do to ensure it goes up in the future. For example, paying debts on time, even if it’s the minimum amount is a basic yet effective hack. Money Facts UK has nine more steps you can follow if you need extra advice.

Provide Basic Info

And as much of it as possible. As well as a credit score, lenders use things such as names and addresses to perform a background check. Therefore, a lack of information won’t go in your favour. Also, double check the application before sending it off for appraisal. Banks, in particular, reject stuff out of hand if they don’t have the correct details at the time of filing. This means anything from a new address to a new job. It also includes spelling mistakes, so make sure they are zero. If you can verify them with references, that’s a bonus.

Try Non-Traditional Lenders

Banks have a strict policy which they follow to the letter. As a result, securing a loan can be tough if you have a few things which don’t look good on paper. Fast Loans UK is different as it says yes where others say no. Don’t worry because it isn’t a scheme. They have quality control managers to help accept applicants others might find risky. A credit union is another option. Created to help people in debt, it won’t turn its back if your credit is poor and you struggle to get through the month. Of course, always avoid loan sharks as they are dangerous and unscrupulous.

Offer Security

The definition of an unsecured loan on Money Supermarket is: “Unsecured personal loans are available to would-be borrowers… you do not have to be a homeowner to apply.” Therefore, there is no need to provide an asset as collateral. To a bank, this is a risk and they might reject your application. By filing for a secured loan agreement, such as a mortgage, it gives them more security and means they are likely to accept your offer.

Valuables to consider securing against a loan include a house, a car, or jewellery.