Requesting a loan can be confusing if you’ve never done it before, or if it’s been a while (technology is changing the financial sector fast!)
But it’s not as complicated as it might seem.
And if you do your research before you start, you are more likely to not only get approved but also get a more competitive rate.
Read on to learn how to get a loan in five easy-to-follow steps.
1. Figure Out the Best Type of Loan for Your Needs
The first step is determining what type of loan you need.
Some of the most common types of loans include:
- Home loan/mortgages
- Car loans
- Student loans
- Personal loans
- Business Loans
It’s important to request the appropriate loan for your needs.
For example, if your goal is to buy a home, you probably wouldn’t need to request a personal loan.
This is because the amount of money you would likely need to borrow would exceed the amount most lenders would consider for that type of loan.
2. Know Your Credit Score
Before you begin the loan request process, it’s a good idea to find out what your credit score is.
That’s because lenders want to see that you have a solid history of borrowing and repaying money.
The higher your score, the more likely you are to not only get approved but also to get a competitive interest rate.
You are entitled to an annual free copy of your credit report from each of the major credit agencies.
It’s a good idea to check your report once a year to make sure it’s accurate.
If there are errors it could penalize you unnecessarily, so be sure to review it each year and report any mistakes.
If you have bad credit or no credit, don’t worry.
You will likely have to pay higher interest rates than someone with good credit, but may still be able to qualify for a loan.
If you are starting from scratch, you might need to build your credit first by taking out smaller loans before you can qualify for a larger one, such as a mortgage.
3. Compare Lenders
Next, it’s time to start comparing lenders to make sure you are getting the best rate possible.
There are several different types of lenders to consider, including:
- Banks
- Credit unions
- Online lenders
- Peer-to-peer lenders
Banks and credit unions are traditionally where most consumers go to borrow money, but that’s starting to change.
Now there are several more options, including payday loans for short-term money needs, and peer-to-peer lending, which connects borrowers with investors willing to lend money for a pre-determined interest rate.
Online loans are gaining in popularity for several reasons.
For one, borrowers don’t even need to leave the comfort of their home to apply.
Online loans also give consumers the opportunity to compare rates from multiple lenders quickly.
This can be much more time-efficient than visiting several banks or credit unions, and it helps ensure that you are getting the best rate possible.
4. Review Your Loan Terms
Once you understand what types of loans you qualify for, you will want to review the terms they’re offering.
Things to look for include:
- The length of the loan, meaning how long you will have to pay it back
- The amount of interest you will be charged
- How you will make your payments (for example, find out if you can pay electronically, or if you need to mail in a monthly check.)
- If there are any penalties for paying off the loan early
Ask your prospective lender to explain what your monthly payment will be, and what penalties you might face for late payments.
Next, carefully review your budget to make sure you will be able to afford the loan payment.
If not, you may need to reconsider how much money to borrow.
5. Request a Loan
The final step is to fill out the form and request the loan.
Gather any necessary information and documents you will need before you begin – this will speed up the whole process.
Make sure you are prepared to answer all of the questions, such as how much money you wish to borrow and your current income.
In some cases, you may be required to provide proof of income, such as pay stubs or past tax returns.
You will also likely be asked to provide your social security number and identification, such as a driver’s license.
After you complete your loan request, the lender will evaluate you as a potential borrower.
The more money you want to borrow, the longer the process is likely to take.
For example, if you only need $1,000 to pay off a credit card, you will probably get approved a lot faster than if you are requesting a home mortgage.
Once you are approved, review the terms and make sure you’re getting the best rate possible.
If you’re not convinced, you may consider requesting a loan from a different lender.
On the other hand, if you’re denied, it might be due to:
- A high debt-to-income ratio
- Bad credit
- No credit
Should your request get rejected you could still try other lenders, but if your request is rejected by multiple lenders, you might have to address the reasons and try again.
You might also consider asking a friend or family member with an established credit history to act as a co-signer.
Basically, having a co-signer means that if you are unable to make payments, they agree to make them on your behalf.
5 Ways to Boost Your Loan Request Now
Obtaining a needed business loan from banks or other financial institutions is not really rocket science. Simply put, lenders are looking at the potential return on investment in your business and the level of risk you represent as a borrower.
If you have any reservations, follow the guidelines below to boost your chances of getting a loan:
1. Know Your Assets
In time, most business operations will have to generate or accumulate a certain amount of assets. This could include physical property, financial assets, intangibles or cash. A lender is sure to take a long look at your company assets, and you should be prepared for that.
If you are not able to repay your loan, the lender will want to know that your company has enough assets to balance out the loan. They will also want to know about any other loans that you may have. In the case of default, their institution would be moved further down the list of those to be repaid.
2. Have Realistic Expectations
It’s OK to have high expectations for your first business loan but be realistic when it comes to the final outcome. Understand the limitations that are presented with your business assets while demonstrating an air of ambition, enthusiasm, and confidence.
Show the lender that your company makes sound judgment calls and that this funding will help to catapult your company to even greater accomplishments.
3. Honesty is the Best Policy
It is important to not get greedy or over-enthusiastic in your quest for funding. Most lenders can see right through this and if you exaggerate your assets or other aspects of your business, you will be getting off on the wrong foot.
Focus on reflecting the most shining aspects of your company, avoid skewing any figures, and don’t overestimate assets. If you go the honest route, you won’t be burdened with the humiliation of being found out later, or possibly facing a lawsuit.
4. Get Sound Advice From Peers
There is a good chance that you have contacts or colleagues who have been through this process. Call them up! After all, that’s what friends are for.
You do not have to take their advice word for word but you’re likely to gain some insight to the overall process. This could only help your chances of getting approved for a business loan.
5. Consider All Options
There are options when it comes to small business funding. You may end up with a peer-to-peer loan, funding from a traditional bank, or a specialized alternative lender.
Make sure that you keep your options open and keep your eye on the prize. You could have business funding in no time and be on your way to fulfilling your dreams.
This is How To Get A Loan in the Age of Technology
If you are interested in requesting a personal loan, LendGenius can help.
Simply complete our online form so we can help connect you with a lender in our network.
