Whether you need to buy a property or start your own business, a loan may come in handy in this big purchase. However, applying for a loan can be tough at times. Some lending institutions can have very tight guidelines that you need to meet in order to qualify for the loan. These are just some of the basic things that you need to check before approaching the lender.
Proof of identity. In whatever type of loan you’re applying to, your identification is always a basic requirement. You need to show one or more valid ID’s that contain your signature and preferably your recent photo. Government issued ID’s and passport may satisfy this requirement.
Proof of income. In order for the lender to trust that you will be able to repay the loan, you need to show proof that you are earning enough income to sustain the repayments. Lenders also love a long employment history with the same company, because it just proves that you are trustworthy as an employee and that your job is stable.
Credit rating. Unless you are applying for bad credit loans, your credit rating will be the first thing that the lender would look into. Your credit score shall determine if you will get approved for the loan and what kind of rates you will get. If you’ re afraid that your credit rating might not land you a good deal, maybe you can check your credit report first and fix some errors that could give your score a boost. In addition, you may want to pay off some balances and stay current on your other bills.
Downpayment. In some kinds of loan wherein you need financing for a property, like a housing or a car loan, you may be required a certain downpayment. Before you are granted with your request, you need to provide a certain downpayment, depending on the amount you will borrow and the length of the loan period.
Collateral. It’s not always necessary, but if your credit score is less than perfect, a collateral might help you out. Using a valuable property as collateral serves as security for the lender. It limits the lender’s risk should you fail to repay what you borrowed because there’s an asset that they can seize to cover for what you owe. In some cases, secured loans may also offer lower interest rates because of the added security by the collateral.
Co- Signer. A co- signer is someone who would agree to join in signing your loan application, promising the lender to pay off the full balance of the loan should you fail to do so. Having a co- signer is not always a requirement, but if you are having trouble getting approved for a loan because you don’t have sufficient credit or bad credit, a co- signer can help you out. This person should have a lengthy and good credit rating, and preferably a lengthy employment history, which are enough to gain the lender’s trust.
In this case, the co- signer bears the most risk, since he will be the one responsible if you fail on your end. This someone must be very close to you to accept this risk, so you must not take it for granted.