Ten mistakes preventing you from getting a bank loan
Getting a loan is an easiest and a fastest way to find needed money, whether for buying new appliances, vehicle or just for having your deserved vacation. There are thousands of different lenders who offer a variety of loan types, adjusting the specifics of loans to the needs of borrowers. For the urgent cash, you may apply for a short-term personal loan or a payday loan, while for purchasing equipment, car, or a house there are serious long-term loans to help you in that.
When applying for a loan you have to be aware of requirement a lender sets to a potential borrower. It’s a huge mistake to think if you have a job you can have a loan with no issues. Neglecting approach to searching and applying for a loan may lead to getting terms which are way worse than you could have got offered. Applying without proper research could also result in unreasonably high rates to pay and, possibly, to your failure to pay the loan back eventually.
Here are the TEN critical mistakes to avoid when getting a bank loan.
Applying only at your local bank is not the wisest option, as you are narrowing your choice. Of course, if’s more comfortable to get a service from your neighbor bank, but keep in mind that local bank, especially a little one, will never offer the best terms. Don’t be cautious about dealing with online well-respected lenders, especially when it comes to short-term personal loans. Online lenders compete for clients, so it’s highly likely they will offer you prime rates even if your local bank qualifies you only for sub-prime terms.
Advice: go to the web and check out a dozen of lenders and we assure you, you will have what to choose from.
2. Not finding out your credit score before applying
There are plenty of official web-agencies where you can get your credit history report in order to find out your exact credit score. It happens too often that borrower, not knowing their credit score mistakenly apply for subprime loan terms, while there was an excellent chance to have better rates and better final cost of the loan.
If it turns out you do really have a poor credit score, you better fix it and improve and apply a bit later, saving a lot of money on the cost of a loan.
You should always keep in mind that every time you apply for a loan, whether you receive an approval or refusal, it affects your credit score. To not to hurt your score, study the lender’s eligibility terms before applying to find out whether you match the basic requirements.
For example, if the loan you are interested in requires a credit score above 640 and you only have 550, the loan’s officer will refuse you and that refusal will hurt your score even more. Never underestimate this aspect.
4. Borrowing the sum which exceeds your actual needs
Self-reliance and confidence are good, but not when it comes to borrowing money. Everything may happen in the future, you may lose your job or become unable to pay for your lifestyle. Adding the need to pay back the loan may drain you financially and psychologically, so always borrow the exact sum you need for the specific purpose. Try to pay the loan back as soon as you can. Choose the bank (or a non-bank lender) who take no fees for premature payback.
5. Not paying proper attention to “penalties” chapter in your contract
Not only “penalties” chapter but the whole contract requires your thorough study, but skipping penalties chapters will bring you unwanted “surprises” in future, when you’ll be forced to pay fees for skipping one or two regular payments. It may also lead to withdrawing your collateral, raising your percentage rate (in case you have adjustable rate), etc.
Time of repayment is the period you should return the money to the lender, adding the interest rate to the “body of the loan”. Short-term loans are easier to obtain but also riskier in terms of higher rates. If you have a stable income and stable lifestyle and you are not suffering financially, you may apply for a short-term loan to pay it back sooner. If it is easier for you to pay less during a longer period of time – choose a long-term loan with lower rates and more flexible terms of repayment.
If your score and qualification allow – choose the fixed rate loan over adjustable rate loan. Fixed rate bring stability due to the exact same amount to pay monthly. Adjustable rate means your rate could be increased any time when the lender finds it appropriate.
Even when emotions take over and you are ready to fall for any terms to buy something you are dreaming about – cool down and think twice. There are loans you can obtain immediately with very soft requirements from the lender, but the other side of such loan is always incredibly high rates.
Short-term personal loans, payday loans, cash advance – these are the loans with the highest rates.
Check out all types of loans lenders are ready to grant you and opt for the moderate rates, with no prepayment.
To get lower rate you may provide the bank with a valuable asset as collateral to secure the loan.
Again – shop around and compare the terms! Get yourself a two-week period for searching and comparing terms, and you will be surprised how many offers you’ll get with the better terms, comparing to the initial offer you’ve received first. If you have a chance – get a pre-approval from several lenders and then you will have a clearer picture about your qualification and possible rates.
Don’t even think about lying in your application form about your score or income. First of all, the officer will detect the false information with 100% probability and aside from getting refusal about the loan you will be charged a serious fee for lying. What is worse this accident will affect your credit score terrifically which will complicate your next loan applications. It is better to get a refusal due to the low score than getting a refusal plus significant fee and the whole set of negative consequences.
Not only the price what really matters when dealing with the lender. A good and responsive customer support sometimes is more important than the cost of the loan. Of course, if there is a significant difference in rates you should opt for a cheaper loan, but still, pay close attention to who you are dealing with.
Find out how loyal your lender to the possible situation of your financial hardship when you’ll have to skip one or two regular payments and whether the lender charges its borrowers for that.
what to bring when applying for a car loan
When you apply for a car loan loan through the Internet, you enjoy a vast range of advantages. The process of application is very simple. While the verification process takes very little time, your application gets approved almost instantly. Most of the times, you do not even need to wait for hours. Your loan is approved within minutes of submitting your application. Following are some of the tremendous advantages of applying online for auto loans.
If you are planning to apply for a car loan and are looking for the best deal, you are recommended to go for pre-approved loans. If you directly go to a dealer and buy a car by choosing a finance option, as suggested by them, you are very much unlikely to get the best deal. This way, you will never be able to explore all your financial options. The best way is always to request for a loan estimate from at least four lenders. It does not cost anything to ask for a loan quote from a financing company. You can request a free loan quote anytime from the financing company of your choice. Analyzing different quotes from different lenders will provide you an excellent opportunity to decide which loan option is the best for you. These loan quotes are nothing but pre-approved loans. Once you decide to go ahead with a specific type of financing option, all you have to do is to make a phone call to the lender and that is it. Here, it is important for you to understand that you can also get loan quotes through the traditional process of personally visiting a lender, but the reason why it is recommended to go for online quotes is that it is a less time consuming process.
Easy Loan Comparisons
When you apply for a car loan by giving a personal visit to your lender, it becomes very difficult for you to compare the various loan options available to you. You will have to invest a lot of time to do that. However, the online process provides all the information at your fingertips. You can do the comparison-shopping in a more effective way. Everything is just a click away. You can easily call multiple loan companies and ask for loan quotes.
Sub Prime Auto Lenders
What is more, when you apply for a car loan online, you also get an opportunity to access a wide range of sub prime auto lenders. Therefore, even if your credit score is poor, you can still find the best loan offer available to you with ease.
Overall, we can see that there are two ways to apply for a car loan –the traditional way and the online process. If you value your time and money, you are recommended to go for the later.