Deciding the amount you want to borrow is the first step in
applying for a loan. Even though you don't want to limit your dreams, according
to suggestions of many financial advisors is to limit your debt ahead of time
by exploring other options, such as no-interest loans from family members or
personal savings.
Finding the Right Lender
When you confirmed that required amount start looking for a
lender who specializes in that volume. Whether it is a home or an auto loan, the
conversation with your lender begins with the amount you want to borrow, and
you should get a good idea of what volume the lender is comfortable with from
that discussion.
Try to find someone to introduce you to a lender, such as a
friend or associate who has successfully used that lender in the past. The key
to establish the loan relationship is personal connection.
Loan Application
After choosing a lender, the next step in the process of
applying for loan is the application. Loan applications involve a huge amount of
paper work. The lender wants to be sure that you are getting into something
that is right for you, and this involves a careful checking.
Most of the information you will fill out centers on two
things: your income and your credit. Copies of tax returns and/or pay stubs are
generally required as a proof of your income.
A credit check from one of the
major credit bureaus is required as a proof your credit. It is always better to
get your own copy of your credit report first.
Credit Report
Get familiar with your credit report, and be prepared to
explain any holes or problem areas.
If you had bad credit a few years ago but
have been working to improve credit score, then explain this to your
lender, along with the steps you have taken to improve your credit. Finally, it
is a personal call by the lender to approve or deny your loan.
It becomes a waiting game after submitted your loan application.
Decision times can vary from a month to as quickly as 24hrs. Your lender should
be able to give you an idea of how long it will take to hear back.
There may be additional paperwork to sign, known as closing
forms if your loan is approved. Try reworking the terms of the loan, such as possibly
lowering the amount, or searching out another lender if your loan application
is denied.
What do I do if I have been turned down for a loan?
If you've been turned down for a loan, use this table to identify the steps you can take to improve your credit:
- Pay off your entire bill each month. If you can't, try to pay more than the minimum balance due. This will reduce finance charges and total interest paid.
- Pay on time to avoid late fees and to protect your credit. If you cannot pay on time, call your creditor(s) immediately to explain the situation. They may waive late fees or be willing to make different payment arrangements.
- Always check your monthly statement to verify transactions. Call your creditor(s) right away if you see errors in your statement.
- Ignore offers that creditors may send you to "reduce" or "skip" payments. You will still be charged finance charges during these "free" periods.
- Think about the cost difference if you purchase desired items with cash versus if you purchase them with credit: For example, if you purchase a $500 stereo with a credit card with a 20% APR, it will cost $1,084 and take 9 years to pay off if you only pay the $10 minimum monthly payments.
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