Applying for loans will be different for every bank and credit union. However, if you want to ensure that you have better chances of getting approval upon application, there are different ways to do so.
Hence, here’s a guide and a few tips to help you apply for a loan and increase your odds of accepting your application
Check the Required Documents
Right off the bat, the most important requirement when applying for a loan is the required documents. However, the requirements will vary depending on the loan provider you plan to apply for.
The best thing you can do is to make sure to take your time to talk with a financial advisor so that you can complete the necessary papers. However, if you’re planning to walk-in into the bank premises or get CreditNinja loans online, here are a few of the necessary documents that most banks will require.
- Proof of Identity. As its name suggests, proof of identity is an official or government document that will verify your identity. It should be a valid document containing your photo and signature, such as a driver’s license, passport, and social security card, depending on what your bank accepts.
- Proof of Address. This is another document that will serve as a piece of evidence that the address you stated on their official documents matches your actual address. Though they might require it for other official reasons, still, you need to prepare this document to verify your existence further. You can bring your electricity, gas, internet, or water bill for this , a credit card bill or bank statement
- Proof of Income. Most importantly, the bank will also require you to submit your proof of income to determine your ability to pay and assess the possible risk when lending money to you. You can submit your certificate of employment with monthly income, pay slips, or payroll bank account statement for this requirement.
There may be other documents that your bank will require. So, prepare them a month or so before your planned appointment since preparing some documents may take much longer than expected.
Understand Available Loans You Can Apply In
Financial institutions provide a wide range of loans to many people. The variety of selections can be overwhelming, especially if this is your first time. In this situation, the best thing you can do is determine why you need to take the loan so that you can narrow down your list of options.
To help you take a sneak peek at the possible loans, here are the different types you can check out.
- Personal Loans. This type of loan is the most common loan people take. This loan helps cover several of your expenses, such as large purchases, emergencies, and more. People may confuse this with a credit card, but a personal loan is a one-time payment. Then, the borrowers will repay the amount plus the interest in installments throughout the term.
- Payday Loans. This type of loan is usually used for essential expenses like utilities, rent, and groceries. Borrowing money in this type of loan typically has a high-interest rate, so it shouldn’t be utilized for random impulse buys since borrowers should repay this loan when they receive their next paycheck.
- Small Business Financing. This type of loan is for aspiring business owners who need financing for their upstart business. This loan is commonly used for purchasing the essentials for their business, such as stocking up the inventory, new equipment, or expanding operations.
Check Your Credit Score
After following the tips so far, the next thing you should worry about is your credit score, which will tell your loan provider about your creditworthiness. This will help them assess what type of borrower you are, such as how likely you are to pay your dues on time.
Although the offers vary by lender, your credit score will sometimes determine how much money your loan provider will lend you. If you’re a bad borrower, but they presented you an amount anyway, then you shouldn’t expect a relatively huge sum. They can’t risk lending a considerable amount to a bad borrower.
Improve Your Credit History
On top of your credit score, you should also put importance on your credit history. Your credit history records how you’re paying off your debts for your other loans and credit cards.
The difference between credit history and credit score is that the former is a detailed report about your repayments and sometimes contains your financial information. Meanwhile, the credit score is a three-digit number based on your credit history information.
To build a good credit history, ensure to pay your bills on time or before their due date. Aside from that, it would help if you did not carry large amounts of debt to be classified as a lower-risk borrower. With a good credit history and credit score, it will be easier for your loan application to get approval with considerably lower interest rates.
There are times when finances can be a bit tight, and you will need the help of a loan. Getting a loan can be considered a good financial situation if you’re responsible. If this is your first time getting one, applying for a loan is relatively easy if you follow the tips mentioned above.
Article written by Tiffany Wagner for America’s Loan Company