The Sunday Mail
A loan can help you pay for the things need when you don’t have the cash, but borrowing money can be complicated. Starting the bank loan application process without understanding the ins and outs can cause your loan request to be rejected. Learn what to expect and what you can do ahead of time to increase the odds of getting approved.
Understand your credit
You generally need credit to get a bank loan. In addition, your credit will often dictate the type of loan and loan terms a lender grants you. This means that you should have a history of borrowing and repaying loans to get a loan. How do you get a loan when you need money if you don’t have credit?
You have to start somewhere, and that generally means borrowing less money at higher interest rates.
Once you develop a strong credit history, lenders will lend you more — and at lower interest rates.
Decide on a bank loan amount
Remember that a loan isn’t free money — you will eventually have to pay the borrowed amount plus interest back to a bank or other lender. If you don’t make loan payments on time, your credit score could drop. This is why it’s important to settle on the right borrowing amount.
Consider the amount you need based on what you plan to do with the money. But also factor in what your regular loan payments might be and whether you can keep up with them according to the loan repayment period.
It’s also a good idea to run preliminary loan calculations before settling on a loan amount. This allows you to see how much you’ll pay for a loan of a certain amount, and how a different loan amount (or loan term, or interest rate) might save you money. There are plenty of online tools out there to help you calculate loans. Of course, loan rates and lender terms can make your final loan installments slightly different.
Determine the type of bank loan you need
Next, figure out what type of bank loan you need. The type of loan you get will depend on what you plan to do with the money. Some common loan types include:
- salary based loans
- mortgage loans
- Personal loans, which can be used for almost any purpose
- Business loans for starting or expanding your business
- Student loans for educational purposes
- Fast loans, which can provide quick cash for emergencies
Some lenders may let you take out a certain type of loan that does not match your specific need for a loan. For example, you can generally take out a personal loan to pay for health, home repair, or other expenses. However, other loan types must be used for a specific purpose. For example, you generally have to use a mortgage loan to buy a home. In addition, you may not be eligible for all types of loans. To get a student loan, for example, you usually have to provide proof of enrolment in a degree program.
Decide where to borrow money
Once you have an idea of your credit, loan type, and loan amount, shop around for a lender.
Again, the type of loan you want may dictate your choice of a lender. Some institutions don’t offer business loans or student loans.
Start your search at the institutions best known for making affordable loans of the type you want.
Check with several institutions and compare interest rates and costs.
Some people borrow money from private lenders, such as friends or family. While that can make approval easier and keep costs low, it can also cause problems. Make sure you put everything in writing so everybody’s on the same page — money can ruin relationships, even if the dollar amounts are small.
Avoid high-cost loans and predatory lenders, who will often dupe you into a loan you don’t qualify for or can’t afford. It’s tempting to take whatever you can get when you’ve been turned down repeatedly and don’t know how else to get a loan for the money you need. However, it’s not worth it — they’ll lend you money, but you’ll find yourself in a hole that’s difficult or impossible to get out of.
Payday loans, which are high-interest short-term loans, tend to be the most expensive options. – The Balance.