Easy ways to get a bank loan
Borrowing money can help you get things done, but the process can be complicated. Mistakes can be costly and can lead to your loan application being rejected.
If you need to get a loan, learn what to expect and what you can do ahead of time depending on www.thebalance.com.
Determine the type of loan you need
The first step is to determine what you need. The type of loan you get will depend on what you plan to do with the money. Some common loan types include:
* Car loans for the purchase of a vehicle
*Home loans (mortgage loans), including second mortgages to buy a home or borrow against the equity in your home.
* Personal loans, which can be used for almost any purpose
* Business loans to start or expand your business
*Education loans or student loans
In some cases, you won’t have many choices. It’s unlikely that someone will lend you enough to buy a home unless you use a loan designed for that purpose. Using a loan that matches your needs will improve your chances of being approved and lower your costs.
Decide where to borrow
Shop around: Again, your choices may be limited depending on the type of loan you want: some places don’t offer business loans or student loans.
Banks are a good place to buy most loans: Check with several institutions and compare interest rates and costs. Peer-to-peer lending and other lending sources in the market should also be on your list. There are also multiple websites with access to multiple lenders. Borrowing online is perfectly safe as long as you stick to reputable sites.
Some people borrow from private lenders such as friends or family members: while this can make approval easier and lower costs, it can also cause problems. Make sure you put everything in writing so everyone is on the same page – money can ruin relationships, even if the Naira amounts are low.
Avoid high-cost loans and predatory lenders: It’s tempting to take whatever you can get when you’ve been repeatedly turned down and don’t know how else to get a loan. However, it is not worth them to lend you money, but you will find yourself in a hole from which it is difficult or impossible to get out.
Understand your credit
You usually need credit to get a loan. This means that you have a history of borrowing and loan repayments. How to get a loan if you have no credit? You have to start somewhere, and that usually means borrowing less and paying more. Once you have developed a strong credit history, lenders will lend you more and offer you better rates.
Review your credit history to understand what lenders will see when you apply for a loan. Do you look like an attractive borrower? If there’s not much to it, you may need to build credit by gradually adding loans to your history. Be sure to correct any errors in your credit reports, as they will reduce your chances of getting a good loan.
Understand the loan
Before you get a loan, take a look at how it works: how are you going to pay it back, monthly or all at once? What are the interest charges? Do you have to repay in a certain way (perhaps the lender forces you to pay electronically through your bank account)? Make sure you understand what you’re getting into and how everything will work before you borrow.
It’s a good idea to do some loan math before you get a loan: this lets you see how much you’ll pay for the loan and how a different loan amount (or interest rate) could save you money money. Get a loan you can really manage, that you can also comfortably repay, and that won’t stop you from doing other important things (like saving for retirement or having a little fun). Calculate how much of your income will go towards paying off the loan, lenders call this a debt to income ratio and borrow less if you don’t like what you see. Lenders often want to see a ratio below about 30%.
Apply for the loan
You are ready to get your loan once you have done the following.
*Choose the best type of loan
* I shopped the competition
* Enhanced your credit, and
* Run the numbers
At this point, you can go to your lender and apply. The process is easy to get started: just tell the lender you want to borrow money and tell them what you’ll do with the funds (if needed). They will explain the next steps and how long the process will take.
When you complete an application, you will provide information about yourself and your finances.
Go through the subscription
After submitting your application, the lender will assess you as a potential borrower. This process can be instant or take a few weeks. For example, home loans take longer than credit card offers because the stakes are higher. Mortgages require detailed documentation like bank statements and pay stubs to prove you have the ability to repay. You can make it easier for yourself by getting everything in order several months before applying.
When applying, lenders will pull your credit (or just use a credit score) and review your application. They may call you occasionally and ask you to clarify or prove something – this is usually a good sign. When lenders ask for details, it means they take underwriting seriously and are more likely to offer competitive rates.
Business loans are similar to any other type of loan. Lenders are looking for the same basic things. However, new businesses do not have a long borrowing (or credit) history. Start-ups and service businesses usually don’t have any assets that can be pledged as collateral, so they have to work a little harder to get loans.
In most cases, a person like the business owner must use personal credit and income to qualify for the loan. They may also have to pledge personal property as collateral to obtain loans. This is often the only way to get loans in the first few years, but you should try to build up business credit so that you can eventually borrow without risking your personal assets.