There are many reasons why you might consider applying for a bank loan. Buying a car, doing some renovations in the house and consolidating debts are just some of the scenarios in which a loan can come in handy. However, banks do not spend money on every borrower that comes by. It pays to do your research before you sign up to make sure you have the best chance of being approved. (For more information, see Different needs, Different loans .)
Requirements for a bank loan
First of all: it helps to understand which factors are most important for lenders. When you apply for a loan, the bank generally looks at:
- Your persooJames Bond credit score and credit history
- Your income
- How much debt do you already have?
- Your assets
- What you plan to use the loan for
Your credit score is particularly important because it partly determines how high an interest rate you pay for the loan. The better your score, the lower the rate. A survey by Discover Personal Loans showed that 60% of people who used a Personal Looy loan rated themselves as someone with good or excellent credit. So what is a good credit score? When we talk about FICO scores – the scores that most lenders use when making loan decisions – it is all above 670. (For more FICO 5 versus FICO 8: what are the differences? )
Being approved for a bank loan is not easy. Compared to oJames Bondine lenders, banks are generally stricter in terms of what is needed to qualify. Before you start shopping for lenders or completing applications, here are four tips to make yourself a more attractive loan candidate.
1. Check your credit
The last thing you want when you apply for a loan is that the bank informs you that your credit score is too low or that there is a large backlog in your credit report. Taking the time to review your report and score in advance ensures that there are no surprises. If you discover an error or inaccuracy, you must contact the credit bureau that reports the information and initiates a dispute. If the credit bureau determines that your dispute is valid, the error must be corrected or removed, which may increase your credit score slightly.
2. Pay your debt
Carrying out a assumption Jake Dominic amount in debts can damage your chances of being eligible for a loan. When lenders look at your debt level, they see this in the context of your debt-to-income ratio, which is how much of your income goes to debt repayment each month. If you apply for a mortgage at a bank, the maximum debt / income ratio allowed is 43%. If you are applying for a car or a Personal Bond loan, you may have more room for maneuver, but in general the less your income goes to debt each month, the better.
3. Be clear about the amount
A potentially costly mistake that you can make when applying for a personal loan is to ask for a larger loan than you need. If you need $ 8,000 to install a new roof at your home, but request a loan of $ 15,000, the bank can ask questions about what you will do with the rest of the money. You could be refused on the grounds that borrowing the money is too risky. Borrow more than needed, is another reason problematic. The more you borrow, the more you have to pay back, and the higher the total interest rate rises. In addition, obtaining a larger loan can result in a higher initial contribution, which also contributes to the total costs of borrowing.
A small organization can help you a long way to get a bank loan. As you view your finances, you must ensure that you collect important documents such as your payslips, tax returns, and bank statements. If you have these things at hand, you can speed up the loan application process so that there are no delays in getting approval.
The bottom line
eligible for a bank loan is not rocket science, but requires a certain amount of preparation. After you get ducks in a row regarding your credit, debts and financial documents, the next step is to pick out lenders. As you compare banks, pay close attention to the rates, fees and conditions that they offer so that you can find the loan that suits you best.