What Do I Need to Do Before I Apply For a Loan?
On the surface, getting a loan is easy.
You make an application, the lender reviews what they review, and within hours in some instances, the money/loan is in your bank account.
On the surface, it is easy.
But beneath all that, there is some work going on.
Do you know your credit score?
If not…..you should.
One of the biggest factors and things used in granting loans is your credit score.
High credit score = good
Low credit score = bad.
Besides having a credit score that falls within a lender’s guidelines to grant a loan, you need to be able to show affordability.
This is usually done by completing an income and expenditure form showing your income and expenses, and what you can afford to comfortably pay each month for a loan.
For some loans, such as guarantor loans, affordability is key, as these loans are not based on credit scores, but affordability and having a guarantor.
Purpose of Loan
The very nature of the loan you require defines the type of loan you need, and also how it is reviewed/underwritten, and approved.
Loans for a property, such as a mortgage or other secured loans, are reviewed in a different manner than an unsecured personal loan.
Secured loans such as a mortgage, usually require a deposit, so the fact there is a deposit and the loan is secured by a property, reduce the lender’s risk on the loan.
By increasing the amount of a deposit and reducing the lender’s exposure or risk on a loan, increases the borrower’s chances of being approved for the loan.
So just a few things to keep in mind prior to applying for a loan:
* Know your credit score
* Know your income and expenses
* Know what type of loan you require, and if need be, have a deposit